CoreStates Financial Corp. has agreed in principle to buy Financial Telesis Inc., a service bureau provider of lockbox and other cash-management services to banks.
The acquisition, which was for an undisclosed price, is to be the core of a new transaction-processing business that will offer private-label services to other banks, said an executive of CoreStates. The unit will be run as a separate entity and will continue under current management.
"This is the beginning of a strategic thrust to become a provider of cash-management services to other banks," said William M. Fenimore Jr., executive vice president at CoreStates. "We think all large banks are beginning to think about why they provide all the products they do and that, in future, they will divest parts of those products."
Prediction on Processing
While many banks have sold their lockbox businesses, other cash-management services, such as balance reporting and cash concentration, tend to remain in-house. Outsourcing advocates have predicted that banks will soon begin to outsource the processing for these products as well, while continuing to offer the services to their customers.
The transaction is expected to close by the end of October, subject to regulatory approval.
Financial Telesis, based in Clifton, N.J., sells lockbox services through its CashFlex division to 30 banks, which they in turn market to their wholesale and retail customers. Another division sells other cash-management services.
The CashFlex unit specializes in lockbox services for nonprofit groups, mortgage companies, realty managers, state and local governments, and hospitals.
The company's customer base is in the Middle Atlantic States, and it has processing centers in Clifton; Langhorne, Pa.; and Fairfax, Va. With the acquisition, CoreStates said, it expects to expand the customer base nationwide.
Initially, the banking company intends to focus on expanding lockbox services, but Mr. Fenimore said he expects the new unit to offer other cash-management products as well.
CEO to Stay On
"We have ideas about a couple of other cash-management products," Mr. Fenimore said, "but whether we do that as part of CashFlex or by acquiring another company is not clear."
Lester Stockel, chairman and chief executive of Financial Telesis, will continue to run the unit.