First Chicago NBD Corp., BankBoston Corp., and State Street Corp. said Tuesday they are teaming up to create the nation's largest stock transfer services company.
To be called Equiserve, the joint venture would control 40% of the market for transfer agent services.
Stock-transfer units owned by First Chicago, BankBoston, and State Street together serve 1,400 publicly traded corporations with 24 million shareholders. They will share ownership with the technology supplier DST Systems Inc.
They are reaching for the scale economies that increasingly influence strategic moves in transaction-intensive businesses. Equiserve would surpass the current market leader-the Chase Mellon Shareholder Services venture of Chase Manhattan Corp. and Mellon Bank Corp. - which serves 14 million shareholders.
"The increased complexity of financial services within the global marketplace demands the technological sophistication that Equiserve is capable of delivering," said State Street chairman Marshall N. Carter. He and counterparts Verne G. Istock at First Chicago NBD and Charles Gifford at BankBoston spoke of the creation of an "unparalleled" competitor with capabilities "unmatched anywhere in the world."
First Chicago Trust Co. of New York will own 50% of Equiserve, the companies said. About half of the 2,000 Equiserve employees-none are expected to be cut-would be based at First Chicago Trust's Jersey City facility.
The rest of the workers would be at what is now Boston Equiserve in Canton, Mass., which would own 25% of the new company. Boston Equiserve is 50% owned by BankBoston and 50% by Boston Financial Data Services Inc., which in turn is a fifty-fifty partnership of State Street and DST Systems.
Kansas City, Mo.-based DST, which will contribute its Fairway system to the operation, will end up with a 25% stake.
Christopher Skaar, First Chicago's senior vice president and head of corporate banking marketing, was designated chief executive officer of Equiserve. Morton B. Comer, a senior vice president at DST, will be chief operating officer.
Bank executives said the venture, to open in the second quarter pending regulatory approvals, will allow their companies to emphasize their respective strengths: DST's in technology, State Street's in processing, and First Chicago's and BankBoston's in blue-chip client relationships.
"We saw the opportunity to create a business with significant scale and with the ongoing technology to support it," said John J. Bradley 3d, BankBoston's director of mergers and acquisitions, who helped negotiate the deal.
"If you're in the business you have to spend a lot on technology to keep up," said James Hanbury, an analyst at Schroeder & Co. "This is one way of doing that."
Stock transfer has become a highly specialized and increasingly technology-dependent business, analysts said. It includes maintaining shareholder records for publicly traded companies, distributing dividends, mailing and tabulating proxies, supporting mergers and acquisitions, and managing employee and direct stock-purchase plans.
Four companies control 81% of the market, which is measured at about 60 million shareholders, analysts said. The leaders include Chase, State Street, and Bank of New York Co., which also dominate the market for other securities processing businesses like custody and corporate trust.
Joint ventures have become popular as a way to spread costs.
In 1995, Chemical Banking Corp. joined forces with Mellon Bank Corp. in Pittsburgh to create what later became Chase Mellon Shareholder Services of Ridgefield Park, N.J.
Boston Equiserve was formed in 1995; its co-owner Boston Financial Data Services was formed in 1973 by State Street and DST.
Equiserve's board will consist of Thomas A. McCullough, executive vice president of DST; A. Edward Allinson, executive vice president of State Street; Jay Hooley, chief executive officer of Boston Financial Data Services; Paul F. Hogan, vice chairman of BankBoston; Peter J. Manning, executive vice president of BankBoston; Philip S. Jones, executive vice president of First Chicago; and Mr. Skaar from First Chicago.