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State Street Closes Charles River Development Buyout Deal

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State Street Corporation (STT - Free Report) recently concluded the acquisition of Burlington, MS-based Charles River Systems, Inc. (Charles River Development), which was announced this July, for $2.6 billion in cash. Around 700 personnel of the acquired company have joined State Street post-acquisition.

Charles River Development, with offices in North America, Europe and the Asia-Pacific region, provides investment-management front-office tools and solutions. The buyout will enable State Street to provide an internationally inter-operable platform, which will link the front, middle and back office capabilities with a single provider, to asset managers and asset owners. This platform will be aided by extensive business data-management facilities.

In addition, the platform will offer increased speed of investment process, modern data-aggregation facility, and analytics and compliance tools. It will also assist in information exchange with other platforms. Moreover, the platform will likely equalize information and systems across a variety of assets, as well as the entire investment process.

Along with the acquisition, State Street will also set up the Charles River Development Client Advisory Board to aid the development process. This board will provide key inputs for the platform, and deliver new products and services in line with market and industry trends.

During the deal’s announcement, State Street’s management had put forward the projected financial benefits. Charles River Development’s buyout will likely help accelerate its annual fee growth by 75-125 basis points.

By 2021, the company is targeting annual revenue synergies that will contribute to earnings before interest & tax (EBIT) in the range of $75 to $85 million and annual cost synergies of $55 to $65 million. Also, the transaction will be accretive to the company’s earnings by 2020.

Notably, State Street suspended its share repurchase worth $950 million in the April-June quarter and for remainder of the year as well, to partly finance the deal.

Encouragingly, Charles River Development’s acquisition will be conducive to State Street’s growth prospects over the long run. The advanced platform will also help the company leverage on further growth opportunities.

The company's shares have lost 12% over the past year, as against 5.4% growth recorded by the industry.


Currently, State Street carries a Zacks Rank #3 (Hold).

Key Picks

A few better-ranked stocks in the finance space are CBTX, Inc. (CBTX - Free Report) , National Bank Holdings Corp. (NBHC - Free Report) and Bay Commercial Bank (BCML - Free Report) . All these stocks flaunt a Zacks Rank of #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Over the last 60 days, the Zacks Consensus Estimate for CBTX’s current-year earnings has been revised 8% upward. Its share price has gained 20.7% in the past year.

National Bank’s earnings estimates for 2018 have been revised 2.4% upward over the past 60 days. The stock has rallied 1.8% in a year’s time.

Over the last 60 days, Bay Commercial’s 2018 earnings estimate inched up 1.2%. Over the past year, its share price has appreciated 44.3%.

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