Broadridge Acquires NewRiver Inc – Analyst Blog

New York-based global outsourcing service provider Broadridge Financial Solutions Inc. (BR) inked a deal to acquire NewRiver Inc. for a total consideration of roughly $77.0 million.

 

The terms of the agreement were approved by the Board of Directors of each company. Broadridge expects the deal to close by the end of August 2010 and to be accretive to its earnings by fiscal 2011.

 

Founded in 1995, NewRiver pioneered the first electronic prospectus and has been helping clients transition from paper to electronic disclosure. The company has been a key supplier of e-records to Broadridge for nearly 10 years.

 

The acquisition will provide Broadridge a wider array of compliance communication solutions for its brokerage, mutual fund and annuity, as well as retirement plan administrator clients and strengthen its compliance communication capabilities.

 

Moreover, with the acquisition, Broadridge will be able to bring NewRiver’s key clients (leading mutual funds, variable annuity insurers, retirement plan administrators and brokerage firms) under its existing customer base.

 

The combination of Broadridge’s information communication capabilities and NewRiver’s electronic database processing and FundPOINT compliance and productivity tool will facilitate financial institutions to meet their regulatory shareholder compliances. As a result, the acquisition will strengthen Broadridge’s Investor Communication Solutions segment.

 

We remain encouraged with Broadridge’s acquisition spree. Broadridge strengthened its Securities Processing business with City Networks’ on-demand products and services, global client base and expert personnel. Additionally, Broadridge expanded its services to public companies with the acquisition of StockTrans, a leading service provider in the stock transfer agency industry.

 

Broadridge reported decent fourth quarter revenues, although net earnings disappointed after considering the effect of discontinued operations. Broadridge expects its revenues to increase modestly by 1% to 4% in fiscal 2011, given persistent softness in demand.

 

We remain optimistic about Broadridge’s strategic acquisitions and potential product launches. However, weaker market activity due to the recession continues. Consequently, results continue to suffer. This can well be inferred from the dull fiscal 2011 guidance.

 

We currently have a short-term Hold rating on Broadridge shares, as indicated by the Zacks #3 Rank.