New York based global outsourcing service provider, Broadridge Financial Solutions Inc. (BR) announced the completion of the divestiture of its subsidiary, Ridge Clearing & Outsourcing Solutions, Inc., to Penson Financial Services, Inc., a subsidiary of Penson Worldwide Inc. (PNSN).
The divestiture, which was first announced in Nov 2009, was valued at $35.2 million paid in the form of 2.46 million common shares of Penson Worldwide at $5.95 a share and a $20.6 million 5-year PWI subordinated note bearing an interest rate of 6%.
Dallas-based Penson provides various securities and futures processing infrastructure products and services to the financial services industry. Penson extends its services to retail brokers (online, direct access, and traditional), as well as banks, institutional brokers, financial technology companies, and securities exchanges in the United States, Canada, Europe and Asia.
Through the divestiture, Broadridge successfully shifted roughly 100 securities clearing contracts to Penson Financial Services for a fair price of $35.2 million.
The sale of the Clearing business will enable Broadridge to focus solely on the revenue opportunities associated with securities processing and outsourcing services. Moreover, the transaction will free up $210.0-$240.0 million from the previously planned Clearing budget, which may be used by Broadridge in its outsourcing and securities processing services businesses.
Alongside the divestiture, Broadridge entered into an 11-year agreement with Penson to provide securities processing services and back-office support. We remain encouraged with the financial benefits of the deal.
We believe Broadridge’s expert financial services and innovative products will make way for a steady flow of revenue through an enhanced product portfolio, generating increasing customer wins. Notably, last month Broadridge announced a multi-year deal from BNP Paribas Fund Services Australasia Pty.
Apart from winning multi-year deals, Broadridge is also expanding its penetration across geographies and product lines with the help of strategic acquisitions. With the recent acquisition of City Networks, Broadridge strengthened its Securities Processing business with City Networks’ on-demand products and services, global client base and expert personnel. Moreover, Broadridge expanded its services to public companies with the acquisition of StockTrans, a leading service provider in the stock transfer agency industry.
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