Charles River Development is a Premier
Provider of Investment Management Front Office Tools and
Solutions
Acquisition Complements State Street’s
Existing Back, Middle and Front Office Capabilities to Enable
First-Ever Global Front-to-Back Client Servicing
Platform1
Acquisition Expected to be Accretive in 2020
and Offers Long-Term Revenue Growth and Cost Reduction
Opportunities2
State Street Corporation (NYSE:STT) today announced that it has
entered into a definitive agreement to acquire Charles River
Systems, Inc. (Charles River Development), a premier provider of
investment management front office tools and solutions. Under the
terms of the agreement, State Street will purchase Charles River
Development in an all cash transaction for $2.6 billion. The
acquisition, which is subject to regulatory approvals and customary
closing conditions, is expected to be completed in the fourth
quarter of 2018.
When integrated with State Street’s existing front, middle and
back office capabilities, Charles River Development’s front-office
systems will enable State Street to deliver a global front-to-back
platform for asset managers and asset owners that will be unique in
the investment servicing industry. This interoperable platform,
supported by deep enterprise data management capabilities, will
enable investment workflows, provide advanced data aggregation,
analytics and compliance tools, and connect and exchange data with
other industry platforms and providers.
“Today’s announcement represents an important milestone in our
digital and technology transformation aimed at providing clients
with differentiated solutions and data. This acquisition will also
enable us to address a large adjacent $8 billion revenue pool for
front office services,” said Jay Hooley, chairman and CEO of State
Street. “Clients today want solutions that can add value and
achieve efficiencies from portfolio modeling and construction all
the way through to custody as they face increasing complexity and
regulatory expectations, and the need to manage costs and achieve
product or geographic expansion.”
Charles River Development is a privately held company
headquartered in Burlington, Massachusetts with offices in North
America, Europe and the Asia-Pacific region. With total revenues of
more than $300 million in 2017, its primary focus is providing
solutions that automate front and middle office investment
management functions across asset classes on a single platform.
Today, Charles River Development serves more than 300 clients
across institutional, wealth, asset owner and alternative market
segments, including 49 of the top 100 asset managers that in
aggregate have more than $25 trillion in assets under
management.3
“State Street is an ideal partner for us as we share a common
focus on helping clients achieve better investment outcomes,” said
Charles River Development CEO Peter Lambertus. “We are excited
about the opportunities ahead and what the combination of our two
firms can do for the industry overall.”
“This acquisition represents not only a significant investment
in our future but also the recognition that the ability to assist
clients in managing their data needs and extract insights from
their data is increasingly the most important differentiator for
our industry,” said Ron O’Hanley, president and chief operating
officer of State Street. “Our interoperable platform will enable
clients to integrate and align their preferred systems utilizing
State Street provided data, and access liquidity, insights, data
and technology infrastructure. We are confident that this
acquisition will enable us to deepen and grow our client base and
deliver positive results for our shareholders.”
The $2.6 billion purchase price is expected to be financed
through the suspension of approximately $950 million of share
repurchases in the second quarter of 2018 and during the remainder
of 2018, and, subject to market conditions, the remainder of
the purchase price through the issuance of equity, with
approximately two-thirds of such equity expected to be in the form
of common stock and one-third in preferred stock.
State Street yesterday announced an increase to its quarterly
common stock dividend for the third quarter of 2018 to $0.47 per
share, an increase of 12 percent over the second quarter of 2018.
The acquisition is expected to be accretive to earnings in 2020,
excluding acquisition and restructuring costs and based on
anticipated revenue growth and cost synergies. The Charles River
Development acquisition was included in CCAR as a potential
strategic change and the Fed granted a conditional non
objection.
State Street’s second quarter financial results will be released
on Friday, July 20, 2018 and reviewed, along with the proposed
acquisition, via webcast and teleconference at 8:00 a.m. EDT.
The conference call will be accessible on State Street’s
Investor Relations website at http://investors.statestreet.com and
by telephone at +1 (877) 423-4013 (Conference ID# 5069567) inside
the U.S. and +1 (706) 679-5594 (Conference ID# 5069567) outside the
U.S. The press release announcing the second-quarter financial
results, presentation materials referred to on the conference call,
including both with respect to State Street’s financial results and
the proposed acquisition of Charles River Development announced in
this news release, and additional financial information will be
available on State Street’s Investor Relations website prior to the
conference call.
A replay of the conference call will be available for
approximately two weeks following the conference call on State
Street’s Investor Relations website
http://investors.statestreet.com and by telephone at +1 (855)
859-2056 (Conference ID# 5069567) inside the U.S. or +1 (404)
537-3406 (Conference ID# 5069567) outside the U.S.
Forward Looking Disclaimer
This news release contains forward-looking statements as defined
by United States securities laws, including statements relating to
State Street’s planned acquisition of Charles River Development and
related business, financial, capital and operational effects and
considerations. Forward-looking statements are often, but not
always, identified by such forward-looking terminology as “will,”
“opportunity,” “expect,” “estimate,” “project,” “anticipate,”
“plan,” “strategy,” “propose,” “priority,” “intend,” “may,”
“objective,” “forecast,” “outlook,” “believe,” “seek,” “trend,”
“target,” and “goal,” or similar statements or variations of such
terms. These statements are not guarantees of future performance,
are inherently uncertain, are based on current assumptions that are
difficult to predict and involve a number of risks and
uncertainties. Therefore, actual outcomes and results may differ
materially from what is expressed in those statements, and those
statements should not be relied upon as representing our
expectations or beliefs as of any time subsequent to the time this
news release is first issued.
Factors that could cause changes in the expectations or
assumptions on which forward-looking statements are based cannot be
foreseen with certainty and include, but are not limited to:
- the possibility that some or all of the
anticipated financial, operational, product innovation or other
benefits or synergies of the acquisition will not be realized when
expected or at all, including as a result of the impact of,
additional costs or unanticipated negative synergies associated
with, or problems arising from, the integration of Charles River
Development, as a result of regulatory or operational challenges we
may experience, as a result of disruptions from the transaction
harming relationships with our clients, employees or regulators, or
as a result of the strength of the economy and competitive factors
in the areas where we and Charles River Development do
business;
- the failure to obtain necessary
regulatory approvals (and the risk that such approvals may result
in the imposition of conditions that could adversely affect us or
the expected benefits of the transaction), to satisfy any of the
other conditions to the acquisition on a timely basis or at all or
to arrange financing consistent with our expectations or at
all;
- the occurrence of any event, change or
other circumstances that could give rise to the termination of the
definitive purchase agreement in respect of the acquisition;
- potential adverse reactions or changes
to client, regulatory, business or employee relationships,
including those resulting from the announcement or completion of
the acquisition;
- demand for our and Charles River
Development’s services and product offerings;
- requirements to obtain the prior
approval or non-objection of the Federal Reserve or other U.S. and
non-U.S. regulators for, or other market, business or other factors
that could challenge our execution or implementation of or cause
changes to, the use, allocation or distribution of our capital or
other specific capital actions or corporate activities, including,
without limitation, acquisitions, dividends, stock purchases and
redemptions and investments in subsidiaries;
- the large institutional clients on
which we focus are often able to exert considerable market
influence and have diverse investment activities, and this,
combined with strong competitive market forces, subjects us to
significant pressure to reduce the fees we charge for our or may
charge for Charles River Development’s products or services and to
potentially significant changes in our fee revenue;
- our ability to recognize evolving needs
of our and Charles River Development’s clients and to develop
products that are responsive to such trends and profitable to us;
the performance of and demand for the products and services we and
Charles River Development offer; and the potential for new products
and services to impose additional costs on us and expose us to
increased operational risk;
- our ability to control operational
risks, data security breach risks and outsourcing risks, our
ability to protect our intellectual property rights, the
possibility of errors in the quantitative models we use to manage
our business and the possibility that our controls will prove
insufficient, fail or be circumvented;
- our ability to expand our use of
technology to enhance the efficiency, accuracy and reliability of
our operations and our dependencies on information technology and
our ability to control related risks, including cyber-crime and
other threats to our information technology infrastructure and
systems (including those of our third-party service providers) and
their effective operation both independently and with external
systems, and complexities and costs of protecting the security of
such systems and data;
- adverse changes in the regulatory
ratios that we are, or will be, required to meet, whether arising
under the Dodd-Frank Act or implementation of international
standards applicable to financial institutions, such as those
proposed by the Basel Committee, or due to changes in regulatory
positions, practices or regulations in jurisdictions in which we
engage in banking activities, including changes in internal or
external data, formulae, models, assumptions or other advanced
systems used in the calculation of our capital or liquidity ratios
that cause changes in those ratios as they are measured from period
to period;
- changes in law or regulation, or the
enforcement of law or regulation, that may adversely affect our or
Charles River Development’s business activities or those of our or
Charles River Development’s clients or counterparties, and the
products or services that we or Charles River Development sell,
including additional or increased taxes or assessments thereon,
capital adequacy requirements, margin requirements and changes that
expose us or Charles River Development to risks related to the
adequacy of our or Charles River Development’s controls or
compliance programs;
- adverse publicity, whether specific to
State Street or Charles River Development or regarding other
industry participants or industry-wide factors, or other
reputational harm;
- our ability to grow revenue, manage
expenses, attract and retain highly skilled people and raise the
capital necessary to achieve our business goals and comply with
regulatory requirements and expectations; and
- changes in accounting standards and
practices.
Other important factors that could cause actual results to
differ materially from those indicated by any forward-looking
statements are set forth in State Street’s 2017 Annual Report on
Form 10-K and its subsequent SEC filings. Investors are encouraged
to read these filings, particularly the sections on risk factors,
for additional information with respect to any forward-looking
statements and prior to making any investment decision. The
forward-looking statements contained in this news release should
not be relied on as representing State Street’s expectations or
beliefs as of any time subsequent to the time this news release is
first issued, and State Street does not undertake efforts to revise
those forward-looking statements to reflect events after that
time.
About State Street Corporation
State Street Corporation (NYSE:STT) is the world's leading
provider of financial services to institutional investors including
investment servicing, investment management and investment research
and trading. With $33.9 trillion in assets under custody and
administration and $2.7 trillion* in assets under management as of
June 30, 2018, State Street operates globally in more than 100
geographic markets and employs over 38,000 worldwide. For more
information, visit State Street's website at
www.statestreet.com/platformforgrowth.
* Assets under management include the assets of the SPDR® Gold
ETF and the SPDR® Long Dollar Gold Trust ETF (approximately $33
billion as of June 30, 2018), for which State Street Global
Advisors Funds Distributors, LLC (SSGA FD) serves as marketing
agent; SSGA FD and State Street Global Advisors are affiliated.
1 Offered by a single provider2 Excluding acquisition and
restructuring costs3 PwC Strategy & Analysis,
WillisTowersWatson; Prequin Hedge Fund Online; Swifi; PIO Online;
Cerulli Associates; Scorpio Partnership; PwC Market Research
Center
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version on businesswire.com: https://www.businesswire.com/news/home/20180720005132/en/
State Street CorporationIlene Fiszel Bieler, +1
617-664-3477orMarc Hazelton, +1 617-513-9439
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