Wells Fargo Sells its Stock Transfer Business
In an industry that has already experienced many “jolts” in recent years, Wells Fargo Shareowner Services, the only remaining bank-hosted stock transfer agent of consequence in the U.S., announced on July 12, 2017 that it is selling its business to Equiniti Group plc, headquartered in London, for approximately $227 million. The deal should close in 4Q17 or 1Q18, pending expected regulatory approval. This event is significant for many reasons, and happily not significant for several others.
Of special importance….
- The U.S. banking industry has now, with few small exceptions, fully divested stock transfer to firms that specialize in the function, possessing appropriate record keeping systems, staff, insurance coverage and more.
- Computershare, American Stock Transfer and Wells Fargo are collectively the transfer agent for two thirds of the corporations and three quarters of the shareholders of U.S. public companies. Since Computershare is Australian-based, American Stock Transfer is owned by an Australian private equity firm and Equiniti is U.K.-based, U.S. corporations have unwittingly divested most of this key record keeping and transaction functionality to foreign-owned firms!
- There is no longer a large bank that can leverage its banking services to attract new stock transfer clients.
- Wells Fargo has been SunGard’s largest client for shareholder record keeping software, and it is almost certain Wells Fargo’s clients will be moved onto Equiniti’s record keeping system in 2018. Continental Stock Transfer just switched from SunGard to TS Partner’s TranStar system. So, this event could provide noticeable headwinds for SunGard, which was recently bought by Fidelity National Information Services (FIS).
- Wells Fargo will need to pursue some damage control – directly following that relating to the 2016 cross-sell scandal – because several major U.S. corporations switched their stock transfer service to Wells Fargo in the past year based on an assurance Wells Fargo was in the business for the long-haul, which it obviously was not
While on the coin’s other side….
- Wells Fargo did not sell its business to one of the four other major transfer agents operating in the U.S., so happily there will still be the Big Five (American Stock Transfer, Broadridge, Computershare, Continental and Equiniti) – retaining the healthy level of competition that should “keep agents honest” and their service fees appropriately contained.
- Because Equiniti has no people or infrastructure in the U.S., and therefore needs to retain Wells Fargo’s, clients should experience little or no disruption in key functions like relationship management.
- This deal is comparable to Computershare’s entrée into the U.S. in 2000, when it acquired Harris Bank’s stock transfer business, and Computershare is perhaps the greatest stock transfer agent success story in the last 50 years.
- Further to the last point, Equiniti might be even more innovative and diverse in its service offerings than Wells Fargo has been. In the area of international stock transfer service, it almost has to be.
The result of these various countervailing forces is most Wells Fargo clients are taking a wait-and-see attitude with respect to the deal. Some are doing that while also allowing “pitches” by competitor agents, with no serious intention to switch. Some are using this deal as justification for a Request for Proposal exercise, or at least taking a closer look at their Wells Fargo contract before it becomes assigned to Equiniti. The reader should know we at Shareholder Service Solutions specialize in helping companies streamline the RFP process, or perform a Shareholder Services Check-Up® on their stock transfer contract, fee schedule and recent invoices. For more information call us at 415-246-7243, or e-mail .