BNY Mellon Closes Shareowner Sale
On Tuesday, The Bank of New York Mellon Corporation (BK'>BK) announced the completion of the divestiture of its Shareowner Services business to Computershare. BNY Mellon received $550 million in cash for selling this unit. In April 2011, the company had signed a definitive agreement to sell Shareowner.
Previously, BNY Mellon reported revenues from the Shareowner unit as a part of its Issuer Service segment. The company recorded a significant reduction in Shareowner unit revenues in 2010 mainly due to increased competition. The small size of the unit along with tremendous competition is most likely the reason behind the company’s decision to sell this business.
In November 2011, BNY Mellon was given permission to go ahead with the deal by regulators. The agreement was also subjected to the U.S. anti-trust laws. The anti-trust clearance was required as BNY Mellon and Computershare are ranked first and second in the U.S. market in terms of transfer-agent services. These two companies occupy the top positions of the list which also includes heavyweights like American Stock Transfer, Wells Fargo & Company (WFC'>WFC) and Broadridge.
Computershare is one of the leading providers of transfer agency, share registration, employee equity plans, proxy solicitation, stake holder communications and other diversified financial and governance services across the globe. The acquisition of Shareowner adds nearly 1,060 issuer clients to Computershare’s customer base. Further, the combined firm will garner more market share and will be able to provide its clients with greater opportunities.
For BNY Mellon, the closure of the deal resulted in a slight after-tax net loss, which will be reflected in the company’s fourth quarter results. This loss is mainly due to the impact of non-deductible goodwill associated with the business. However, the divestiture will further enhance the company’s capital position by adding more than $200 million to its capital. Also, the closure improved BNY Mellon’s Basel III Tier 1 common equity ratio by 20 basis points.
This disposition will enable BNY Mellon to concentrate on its core business. Additionally, at the time when many of the financial institutions are struggling with low capital ratios, the company’s capital strengthening initiative could be a major differentiator.
BNY Mellon currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
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