State Street to buy unit from Intesa

— State Street Corp. said Tuesday that it will buy the securities services business of Italian banking group Intesa Sanpaolo for about $1.87 billion in cash.

The financial services provider said the acquisition will broaden its presence overseas, as the Intesa unit has offices in Italy and Luxembourg. State Street anticipates funding the transaction with available capital.

The Intesa agreement follows State Street’s acquisition of Channel Islands based Mourant International Finance Administration, announced earlier this month. Terms of the Mourant deal were not disclosed, but State Street said the acquisition would help expand its global fund administration and alternative servicing operations and its reach in Europe and Asia.

The Intesa deal includes the global custody, depository banking, correspondent banking and fund administration components of the securities services operations. About 555 employees will join State Street on closing.

The Intesa transaction may also include about $16 billion in cash deposits if levels stay consistent with those as of June 30.

Additionally, State Street expects to support the acquired Intesa balance sheet with approximately $800 million of additional capital at the closing.

As part of the acquisition, State Street will enter into a long-term investment servicing arrangement with Intesa to service all of its investment management affiliates, including Italy’s biggest fund manager, Eurizon Capital.

State Street anticipates about $120 million in acquisition-related costs over a five-year period, with most costs taking place in the first three years.

The Boston company expects to save about $90 million over five years and sees the deal modestly adding to its fiscal 2010 earnings.

State Street had $17.9 trillion in assets under custody and administration as of Sept. 30.

Business, Pages 28 on 12/23/2009

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