State Street Corp.'s decision to join forces with Citigroup in the retirement plan business brought together two companies whose approaches to the business could hardly have been more different.

While the deal brought new heft to State Street, its real benefit lay in the access the Boston-based company gained to the kind of growth markets that Citigroup, with its vast retail network, was far better equipped to attack.

Citigroup's base of smaller plan clients "brings State Street into a market that is growing much more rapidly," said Ann Mahrdt, senior consultant on the retirement market at Spectrem Group.

State Street, already one of the world's largest specialists in managing and servicing investments, has $582 billion of assets under management and ranks third among managers of defined contribution plans, with $134 billion at the end of July, according to a survey by Pensions & Investments. That number rises to $200 billion through Citigroup's contribution.

CitiStreet, the name of the joint venture, would serve more than 4 million plan participants, from small companies to huge conglomerates. It would combine State Street's Boston-based Retirement Investment Services unit and its Jacksonville, Fla.-based Wellspring Resources subsidiary with Citigroup's East Brunswick, N.J.-based Copeland Companies subsidiary.

State Street and Citigroup, which formally announced their agreement on Wednesday, said they would evenly split profits of the new company, which is projected to have revenues of about $300 million. The deal is expected to close by the end of June.

Fidelity Investments ranked first in the survey, with $287 billion of defined contribution assets under management, and TIAA-CREF, the huge benefit plan for teachers, was second with $245 billion.

Citigroup does not even rank among the top 100, according to Pensions & Investments. "We had a keen interest in having a fuller spectrum of the marketplace," said Robert C. Dughi, chief executive officer of Copeland, who will add president of CitiStreet to his title after the deal closes.

But the combination could make for an even more formidable foe to Fidelity. "It's a very competitive market," said a Fidelity spokesman. "It depends on large investments in technology and infrastructure. This year alone in our 401(k) business, we have added 1,600 new plans and over 1 million participants."

State Street would also be able to use the joint venture to expand abroad. Citi has a presence in 100 countries worldwide, many of them developed nations where regulations have changed in favor of the defined contribution plan model.

"We always need to look to the future," said James S. Phalen, executive vice president at State Street's Retirement Investment Services unit, who will be chairman and chief executive officer of CitiStreet. "We are very excited about the global opportunities."

State Street has long focused on managing and servicing plans that have over $100 million of assets, but the company faced the prospect of little new growth in that niche. Citigroup, which focuses on far smaller plans through its Copeland Companies subsidiary, would bring State Street a broad new market and a potentially worldwide presence.

Mr. Phalen said State Street's traditional customer base is not expected to grow at the torrential pace that is expected in the small plan market. "About 96% to 97% of the companies were service already have plans so there is no new growth," Mr. Phalen said.

The two banking companies began their discussions about six months ago, said a person familiar with the matter. At one point Citigroup considered making an offer to buy State Street's retirement investment services business outright, but the talks evolved into doing a joint venture.

"It is a marriage," Mr. Dughi said. "Combined, we will be a powerful and formidable competitor."

Some press accounts reported Tuesday afternoon that Citi had intended to buy State Street Corp. outright. Spokeswomen from both organizations declined to comment.

But State Street has a history of vigilantly guarding its independence. Just two years ago it succeeded in scaring off rival Bank of New York Corp., which was attempting to buy up to 10% of State Street's stock in what many observers considered to be the prelude to a takeover.

State Street said the deal with Citigroup would reduce its revenues by 6% but would add to earnings after it closes. State Street has been closely watched by some on Wall Street based on statements its executives made earlier this year about their concerns over revenue sluggishness until after the year-2000 date switch. On Tuesday State Street's chief financial officer said the company is still on pace to achieve its 12.5% annual revenue growth target.

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