It's Official: US Trust Purchasing State Street Private Asset Book

June 25, 2003 ( - Charles Schwab Corp's US Trust unit has signed a definitive agreement to acquire the Private Asset Management unit of State Street Corp.

US Trust’s purchase of the unit carries a price tag of $365 million to be paid in cash,  approximately 5% of which will be subject to the successful transition of the business. The business will operate under the US Trust name following the acquisition and will retain its current management. Eric Hayes, division head and senior principal for State Street’s Private Asset Management business, will be named regional chief executive officer and will head US Trust’s New England business, according to a news release.

The latest announcement represents another move that Schwab – generally regarded as the champion of small investors – is making into the wealthier clientele of the private-asset space.  In 2000, Schwab purchased US Trust in a stock swap valued at $2.9 billion. While this deal pales in comparison, the State Street purchase will add to its heft in this area.

The Private Asset Management group has $11.5 billion in assets under management, as of March 31, 2003, and contributed approximately $80 million in revenue in 2002. The group has 182 employees and is headquartered in Boston, with offices in Hartford, Connecticut; Osterville, Massachusetts; and Manchester, New Hampshire.

For Boston-based State Street, the move is seen as a way to focus on its core business, investment-services and money management for big institutional investors. Earlier this year, State Street announced the $1.5-billion purchase of the Deutsche Bank Global Securities Services division (See  State Street Outlines Deutsche Operation Integration Plans ).

However, times have been tough for State Street, which in April announced the elimination of as many as 1,800 jobs, or about 8% of its work force, as part of a broad effort to cut $125 million in costs during the rest of 2003. 

Subject to regulatory approval, the transaction is expected to close in the fourth quarter of 2003. State Street anticipates that the divestiture will be neutral to operating earnings in 2003 and slightly dilutive in 2004. Private Asset Management services contributed approximately 2% of State Street’s total revenue in 2002, primarily in management fees.