A deal Wilmington Trust Corp. announced last week shows that expanding its corporate client services business remains a top priority for the Delaware company, which remains hampered by problems in its money management units.
Wilmington Trust said it would buy UBS Fiduciary Trust Co., a Weehawken, N.J., provider of trust and investment management services for retirement plans, from UBS AG. The price was not disclosed.
The deal was announced a day after Wilmington Trust said in a filing with the Securities and Exchange Commission that it expected to post second-quarter losses related to a decline in assets at Roxbury Capital Management LLC of Santa Monica, Calif., of which Wilmington Trust owns a stake.
UBS Fiduciary would be the second acquisition this year in Wilmington Trust's retirement and institutional services group, a unit of its corporate client services business.
Gregory W. Tschider, the head of the retirement and institutional services group, said in an interview last week that Wilmington Trust's plan to expand its corporate client services business does not necessarily mean that the company would need to add new retirement services.
"We have developed a nice service offering. We are not looking to do an acquisition just to add a service line," he said. "As different opportunities come up, we will be opportunistic."
Wilmington Trust wants to consider making acquisitions that can add scale and relationships, Mr. Tschider said.
"We want to have discussions with every potential opportunity, and we will continue to look at each deal from a strategic perspective in terms of where it takes the financial services group," he said. "We are open to having dialogues with other organizations."
Wilmington Trust has used acquisitions over the past three years to expand its corporate client services business. That business generated 14% of the company's overall revenue in the first quarter and 13% of the total last year.
On April 30, Wilmington Trust bought AST Capital Trust Co., a Phoenix provider of directed trustee and trust administration services that are offered through financial advisers.
The acquisition nearly doubled the retirement plan assets Wilmington Trust administers, to $41 billion, and doubled the number of plans it serves, to 3,000.
When the deal for UBS Fiduciary Trust is completed later this summer, Wilmington Trust would have 3,800 plans and $46 billion in assets under administration.
Mr. Tschider, who was AST's president before it sold itself to Wilmington Trust, said that acquisition helped lead Wilmington Trust to make a bid for UBS Fiduciary.
AST has provided outsourcing services, including fund accounting and benefit payment services, to UBS Fiduciary Trust's retirement plan clients, he said.
"We've had a long relationship with UBS Fiduciary Trust and have had ongoing discussions with them about a deal," Mr. Tschider said.
The fact that Wilmington Trust would continue to sell its products through UBS' network of 8,200 financial advisers is a major factor in why the company is anxious to buy the unit, since Wilmington Trust sells its retirement products strictly through third-party intermediaries, Mr. Tschider said.
Buying UBS Fiduciary also could enable Wilmington Trust to sell additional retirement products through these intermediaries, he said. In addition, "having access to those advisers is going to enable us to sell more retirement products through a wider group of intermediaries."
Wilmington Trust, which has $48 billion of assets under management as of March 31, has been working for several years to develop a national platform that includes wealth management, investment management, and corporate client services businesses.
It bought the wealth manager Bingham Legg Advisers LLC in June of last year, bringing it into the Boston market. Wilmington Trust now has operations in five of the nation's top seven high-net-worth markets: Boston, New York, south Florida, Philadelphia, and Southern California.
Ted Cecala, Wilmington Trust's chairman and chief executive officer, said in an interview in December that the company would look to add "teams or small firms" through acquisitions.
He said that nothing was in its "gun sights" at the time, but he cited Chicago and the Pacific Northwest as attractive areas.
Analysts said Wilmington Trust will need to take a more cautious approach to making deals, as a result of continued problems with two investment managers it bought in 1998: Roxbury and Cramer Rosenthal McGlynn LLC of New York.
In an 8-K filing with the SEC last week, Wilmington Trust said it expects to take a second-quarter noncash impairment charge of $66.8 million related to Roxbury.
Wilmington Trust said in the filing that the charge was triggered by business conditions, including "a continued decline in assets under management," along with Roxbury's "operating performance and its near-term projections, both of which were below expectations."
Roxbury's assets under management fell 8% in the first five months of this year, to $2.3 billion as of May 31.
In the third quarter of 2006, Wilmington Trust took a $72.3 million noncash impairment writedown after Roxbury discontinued its microcap fund and announced plans to quit the fixed-income business.
A year later Wilmington Trust's earnings were hurt by a revenue decrease at Cramer Rosenthal, where equity market volatility reduced hedge fund performance fees.
Mr. Cecala said in the interview this year that his company will continue efforts to expand its wealth advisory services domestically and its corporate client services here and abroad through acquisitions. Wilmington Trust probably will not make investment management acquisitions now that it has moved to an open architecture, he said.
