State Street-Deutsche Global Custody Deal Completes Primary Closing

February 3, 2003 ( - State Street Corporation executives say they have finalized the primary closing of their $1.5-billion cash and stock deal to buy substantial parts of Deutsche Bank's Global Securities Services. The deal makes State Street the world's largest global custodian.

State Street said a separate closing would be held in the near future for business units in Italy and Austria, upon receipt of applicable regulatory approvals.

In a Monday global conference call with reporters, a jubilant Ronald Logue, State Street president and chief operating officer said consolidation efforts undertaken so far – including meetings with Deutsche Bank’s top 100 global custody clients – have gone extremely well.

Logue told reporters that State Street has been trying to move quickly in any needed systems transition “because speed and accountability are the keys to success” in client retention. Logue said some moving of systems is being carried out in the UK, but the primary systems integration challenge remains the US market. He said State Street would continue to rely on its existing Global Horizon system for its domestic operations since the company has already built excess capacity in it. “That’s where we’re going to get the economies in the US,” Logue told reporters.

Number of Potential US Layoffs Still Not Clear

The impact on US employees remains unclear even with officials’ estimate In November that they would have to chop about 1,000 US employees in the first year after the closing. Logue told reporters that primary US consolidation efforts were scheduled to start on Monday. Approximately 3,200 Deutsche Bank staff members around the world have become State Street employees, officials said.

 State Street is acquiring:

  • Deutsche Bank’s global custody business with assets under custody of approximately $2.2 trillion
  • fund administration services
  • Depotbank services
  • securities lending
  • performance measurement (including WM Company)
  • benefit payments businesses
  • UK and US-based domestic custody and securities clearing.

Deutsche Bank will retain its sub-custody network in Europe, Latin America and Asia. Deutsche Bank will be State Street’s preferred sub-custodian in selected markets, according to the announcement.

The restructuring costs associated with the acquisition in 2003 are expected to be $90 million to $110 million on a pretax basis, approximately half of which will be recorded in the first quarter and the balance over the last three quarters of the year, State Street said. Based on the annualized costs of the acquired businesses for the eight-month period ended August 31, 2002, State Street expects to achieve cost reductions in the acquired businesses of approximately $125 million to $150 million in 2003.