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Broadridge to Buy DST Systems' NACC Business for $410M
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Broadridge Financial Solutions Inc. (BR - Free Report) recently agreed to acquire DST Systems Inc.’s North American Customer Communications (NACC) business for a cash consideration of $410 million. The transaction is anticipated to close next month.
DST Systems’ NACC is the largest transactional printer in North America. The unit offers customer communication services including print and digital communication solutions, content management, postal optimization, and fulfillment.
Notably, NACC generated $1.1 billion of revenues in fiscal 2015, which accounted for approximately 39% of DST Systems’ total revenue. The unit employs over 2,300 personnel and has four production facilities in El Dorado Hills, CA; South Windsor, CT; Kansas City, MO; and Markham in Ontario, Canada.
Broadridge intends to integrate NACC with its Investor Communication Solutions business upon successful completion of the acquisition. The transaction will allow it to boost its digital communications offerings and expand the scale of its print communications business.
Broadridge’s President and CEO, Richard Daly stated, “The addition of NACC, an industry leader, is a natural extension of our communications business and will provide immediate benefits for our clients through enhanced production capabilities and expedited delivery times”.
He added, “It also positions us to be a communications leader across a number of market verticals and a provider of a unique suite of multi-channel communications solutions, empowering Broadridge to accelerate the industry's conversion to digital communications and meet the diverse preferences of our clients' customers."
The company believes that the deal will be immediately accretive to the bottom line. The company expects the NACC acquisition to be 1–3 cents accretive to GAAP earnings and 11–14 cents to non-GAAP adjusted earnings during the first year post completion. During the second year, the transaction will provide 9–13 cents accretion to earnings on a GAAP basis and 16–21 cents on a non-GAAP adjusted basis.
Apart from this, Broadridge expects to achieve cost synergies of approximately $20 million within 18–30 months of completion of the transaction.
Broadridge is a leading global provider of technology-based outsourcing solutions to the financial services industry. The company offers a broad, integrated suite of innovative global solutions across the investment lifecycle in addition to a wide range of cost-effective and scalable solutions to the financial industry. The company’s systems lower clients’ capital investments in operations infrastructure, thereby allowing them to focus on core business activities.
Strength of the company’s products and services, led by the Investor Communications business, allows it to navigate through the ongoing economic challenges. We believe that these positives, combined with new product initiatives, will enable the company to counter macro headwinds to a large extent. They will also provide Broadridge an opportunity to grow further as and when the financial services market improves.
Furthermore, we are optimistic about Broadridge’s strategic acquisitions, product launches, share repurchase programs and regular dividend payment policies. We also believe that the company’s close association with Accenture plc (ACN - Free Report) will be beneficial over the long term.
However, competition and pricing pressure remain major concerns.
Currently, Broadridge carries a Zacks Rank #3 (Hold). A better-ranked stock in the Outsourcing industry is Paychex Inc. (PAYX - Free Report) carrying a Zacks Rank #2 (Buy).
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Broadridge to Buy DST Systems' NACC Business for $410M
Broadridge Financial Solutions Inc. (BR - Free Report) recently agreed to acquire DST Systems Inc.’s North American Customer Communications (NACC) business for a cash consideration of $410 million. The transaction is anticipated to close next month.
DST Systems’ NACC is the largest transactional printer in North America. The unit offers customer communication services including print and digital communication solutions, content management, postal optimization, and fulfillment.
Notably, NACC generated $1.1 billion of revenues in fiscal 2015, which accounted for approximately 39% of DST Systems’ total revenue. The unit employs over 2,300 personnel and has four production facilities in El Dorado Hills, CA; South Windsor, CT; Kansas City, MO; and Markham in Ontario, Canada.
Broadridge intends to integrate NACC with its Investor Communication Solutions business upon successful completion of the acquisition. The transaction will allow it to boost its digital communications offerings and expand the scale of its print communications business.
Broadridge’s President and CEO, Richard Daly stated, “The addition of NACC, an industry leader, is a natural extension of our communications business and will provide immediate benefits for our clients through enhanced production capabilities and expedited delivery times”.
He added, “It also positions us to be a communications leader across a number of market verticals and a provider of a unique suite of multi-channel communications solutions, empowering Broadridge to accelerate the industry's conversion to digital communications and meet the diverse preferences of our clients' customers."
The company believes that the deal will be immediately accretive to the bottom line. The company expects the NACC acquisition to be 1–3 cents accretive to GAAP earnings and 11–14 cents to non-GAAP adjusted earnings during the first year post completion. During the second year, the transaction will provide 9–13 cents accretion to earnings on a GAAP basis and 16–21 cents on a non-GAAP adjusted basis.
Apart from this, Broadridge expects to achieve cost synergies of approximately $20 million within 18–30 months of completion of the transaction.
Broadridge is a leading global provider of technology-based outsourcing solutions to the financial services industry. The company offers a broad, integrated suite of innovative global solutions across the investment lifecycle in addition to a wide range of cost-effective and scalable solutions to the financial industry. The company’s systems lower clients’ capital investments in operations infrastructure, thereby allowing them to focus on core business activities.
Strength of the company’s products and services, led by the Investor Communications business, allows it to navigate through the ongoing economic challenges. We believe that these positives, combined with new product initiatives, will enable the company to counter macro headwinds to a large extent. They will also provide Broadridge an opportunity to grow further as and when the financial services market improves.
Furthermore, we are optimistic about Broadridge’s strategic acquisitions, product launches, share repurchase programs and regular dividend payment policies. We also believe that the company’s close association with Accenture plc (ACN - Free Report) will be beneficial over the long term.
However, competition and pricing pressure remain major concerns.
Currently, Broadridge carries a Zacks Rank #3 (Hold). A better-ranked stock in the Outsourcing industry is Paychex Inc. (PAYX - Free Report) carrying a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>