To Be Top Administrator Of Bank-Managed Funds
First Data Corp. has signed a letter of intent to buy a majority stake in a leading servicer of bank-managed mutual funds, industry sources said.
The agreement, struck last week, calls for First Data's Shareholder Services Group subsidiary to assume.management control of 440 Financial Group, Worcester, Mass.
Spokesmen for the two firms confirmed that such a letter had been signed, but declined to elaborate. Terms of the deal, which is subject to a 60-day due-diligence review, could not be learned.
The deal by First Data, which is known primarily as a processor of credit card transactions, highlights the ongoing consolidation among firms that manage back-office chores for banks and mutual fund companies.
For example, Boston-based State Street Bank and Trust Co. plans to acquire Investors Fiduciary Trust Co., Kansas City, Mo., a top fund custodian. Last year, Bisys Inc., a bank-technology firm in Little Falls, N.J., bought Winsbury Co., a leading administrator of bank mutual funds.
The acquisition of 440 Financial, a unit of State Mutual Life Assurance Company of America, also of Worcester, would make First Data the top partner of banks that manage their own mutual funds.
First Data's bank-fund assets under administration would total $40 billion, topping the $29.3 billion administered by Concord Holding Corp., the current market leader. Their combined client list would include Fleet Financial Group, Bane One Corp., and NationsBank Corp.
The deal could lead to a management shakeup at 440 Financial, which is known as a savvy marketer with a strong feel for technology.
Senior executives of two of 440 Financial's biggest bank clients said they were told their account managers would remain in place.
But one executive, who asked not to be named, said he understood 440 Financial's top management, including chief executive Larry C. Renfro, would stay with State Mutual.
The bank executives added, however, that their organizations could benefit by gaining access to some capabilities of Boston-based Shareholder Services.
"My understanding is that we will be unaffected in any negative sense, and that there may be some positives," said Eric M. Rubin, managing director of Banc One Corp.'s Investment Advisors unit
A controlling stake in 440 Financial would build critical mass in a niche that First Data wants to develop, said F. Mark D'Annolfo, a stock analyst at Adams Harkness & Hill Inc., Boston.
First Data, of Hackensack, N.J., already has a commanding presence in the fund arena, thanks to Shareholder Services' role as the nation's second-largest fund transfer agent in the country, according to Lipper Analytical Services, Summit, N.J.
The company also ranks as the second-largest administrator of bank-managed mutual funds, handling $23 billion of fund assets in contracts acquired earlier this year from Mellon Bank Corp.