State Street said day it would acquire Investors Financial Services for $4.5 billion in stock in a bid to service a bigger chunk of mutual and hedge fund assets.
Boston-based State Street, already one of the world's biggest custodians of investor assets, said it will take over its smaller cross-town rival less than three months after its chief competitors, Mellon Financial and Bank of New York, said they would combine this year.
The deal values Investors Financial at $65.01 a share, a 38 per cent premium to its closing price on Friday. Investors Financial has a Dublin office.
The acquisition will eventually let State Street service about one-third of the $10.4 trillion mutual fund market and one-quarter of the $1.3 trillion hedge fund industry, analysts said.
The deal will close by the third quarter, State Street said.
In early trading, State Street shares, which have climbed nearly 20 per cent in the last 12 months, fell almost 5 per cent to $68.42 on the New York Stock Exchange. Investors Financial shares surged 30 per cent to $61.05, also on the NYSE.
Investors Financial shareholders will receive 0.906 State Street share for each of their shares.
The acquisition will not add to State Street's operating earnings until 2009, the company said, but it expects to see savings as it consolidates staff, technology and real estate.