Fiserv Inc., which is engaged in a lengthy self-review, has opted to sell its investment services unit because it concluded it could not be a leader in the business, though it stopped short of saying it would apply that criterion when deciding about other market segments.
TD Ameritrade Holding Corp. said Thursday that it had agreed to pay at least $225 million in cash for the Brookfield, Wis., banking technology vendor's investment support services division, a move that would bolster the Omaha online brokerage's status as a provider of retirement account services. TD Ameritrade will also pay as much as $100 million more if the operation achieves certain revenue targets.
Jeffery W. Yabuki, Fiserv's president and chief executive, said the company wants to lead in the markets it serves. "Today we are the leading processor of transactions for banks, credit unions, and thrifts," he said in an interview Friday. "You don't think of Fiserv ISS as the market leader."
Fiserv said last September that it was reviewing its operations with an eye to possibly selling or shutting down some of them as part of a process it called Fiserv 2.0.
Investment services is the smallest of Fiserv's three divisions, contributing 3% of the parent's $4.5 billion in 2006 revenue and 3.4% of its $744.3 million in operating income.
The deal is expected to close in four to six months.
Mr. Yabuki said he is comfortable with the businesses that will remain under the Fiserv umbrella. "We don't have any plans today to sell any more businesses," he said, but added that "if I did have plans I wouldn't share them, because I wouldn't want to diminish the marketability of those businesses."
Tom Bradley, the president of the TD Ameritrade institutional unit, said the purchase would make his company more competitive in the institutional investment arena by adding about $28 billion of client retirement assets to its portfolio.
"It takes us to a whole other level," Mr. Bradley said. TD Ameritrade already has $70 billion of assets under custody from advisers and in 401(k) accounts, he said, and "by the time this deal closes, we'll be close to $100 billion. That will be a major milestone." TD Ameritrade's biggest shareholder is Toronto-Dominion Bank.
TD Ameritrade is not buying the entire division; Fiserv has agreed to sell the part that handles custody of individual retirement accounts to Bob Beriault, the division's group president, for about $50 million in cash. Fiserv said it would retain a minority interest.
The sales essentially complete Fiserv's exit from the securities business. In 2005, it sold its securities clearing businesses to Fidelity Investments for $344.9 million.
Analysts said the shift of assets should benefit both companies.
"Fiserv, doing Fiserv 2.0, wants to rationalize and focus on its core strengths," said Robert J. Ellis, a senior analyst at the research and consulting firm Celent LLC. "Fiserv is a technology company.
"This is not a technology piece of that business. It is customer service, record keeping. So it really didn't fit with their overall business plan. It did fit with TD Ameritrade, which has been acquiring other companies in this 401(k) custody space."
Burton Greenwald, the managing director of BJ Greenwald Associates in Philadelphia, said the deal improves TD Ameritrade's credibility in the institutional custody business. "Ameritrade is seeking to become more competitive than it has been in the past with" Charles Schwab Inc. and Fidelity, he said. "What they need is a high level of custody and administrative services. What they're getting is an established infrastructure from Fiserv."
