State Street to Buy Investors Financial for $4.5B

Boston-based State Street Corporation announced Monday that it has agreed to buy Investors Financial Services Corporation in a stock transaction worth approximately $4.5 billion.

According to a press release from State Street, the purchase of the 17-year old company gives it greater capacity to offer services to institutional investors. Investors Financial Services, also based in Boston, offers investment services that include mutual fund, offshore and hedge fund servicing, custody, securities finance, cash management, foreign exchange and transition management.

Investors Financial Services Corporation shareholders will get 0.906 shares of State Street common stock, bringing to 62 million the total number of shares issued.

If the transaction goes through, State Street will have $14 trillion in assets under custody, which includes $3.5 trillion in mutual fund assets under administration and will be servicing more than $340 billion in hedge fund assets.

“Investors Financial Services Corporation and State Street already share a similar focus, service model and customer type, which makes for a seamless and swift consolidation,” said Ronald Logue, chairman and chief executive officer of State Street, in the press release. State Street predicts pre-tax restructuring costs of $625 million to $675 million and puts pre-tax savings following the first two years of closing at $345 million to $365 million.

The greatest savings will come primarily from technology, staffing and real estate consolidations, the news release said.

Each board of directors has approved the acquisition, which is expected to close by the third quarter of 2007. The deal still requires approval by regulators and the shareholders of Investors Financial Services Corporation.