State Street Corp. said Thursday that it would acquire Wachovia Corp.'s institutional trust and custody business in a deal that would significantly raise its profile in the Southeast and increase its share of the middle market.
The deal, for undisclosed terms, is slated to close by the end of October. It would bring Boston-based State Street $61 billion of institutional trust and custody assets and 270 clients in Florida, Virginia, Georgia, and North Carolina.
The business serves middle-market institutions, defined as those with fewer than $500 million of assets. Boston-based State Street's middle-market custody business currently administers $100 billion of assets. State Street is the third-largest custody bank overall, with $5.3 trillion under administration.
State Street and its two main rivals in the world of custody Chase Manhattan Corp. and Bank of New York Co. have built scale through acquisition as other large regional banks have abandoned the business, citing the enormous technology investments required to remain competitive.
Wachovia, based in Winston-Salem, N.C., said it would instead focus its energies on asset management and consulting-related services, which it considers core businesses.
It would be State Street's first acquisition of custody operations in the South. Most of its processing operations handle clients in the Northeast, the Midwest, and California.
"It fills a blind spot for us," said Ronald E. Logue, vice chairman and head of State Street's global investor services.
State Street will open an office in Winston-Salem to manage the business and will hire 43 employees from Wachovia. In addition, the bank said it would expand a location in Atlanta to help manage clients. Wachovia said 140 other employees in the unit would have to choose between reassignment and severance.
Mr. Logue said the middle market presents cross-selling opportunities. In addition to safekeeping, State Street would be able to sell packaged sets of services, including fund record keeping and accounting.