AST and EQ Being Acquired

Big news this summer:  Stock transfer agents AST and EQ Shareowner Services are being acquired by New York private equity firm Siris Capital Group sometime before the end of 2021.  This could be great for many reasons, especially for AST and EQ clients.

It should be noted first that the waiting period for any potential anti-trust action relative to EQ under Hart-Scott-Rodino expired on July 2nd, and necessary EQ shareholder approval for the deal took place on July 19th.  So those key bases have been covered.  For AST the approval process was essentially a non-event, since AST is already owned by an Australian private equity firm (PEP) and this just moves the underlying investor back onto U.S. soil.

Siris is paying over $1.5 billion for the two transfer agents, a lot to be sure but it could be money well spent – much like Computershare’s expensive purchases of Equiserve’s and BNY Mellon’s businesses 9 and 16 years ago that have made Computershare, today, the U.S. and global market leader by far.  Moreover, EQ and AST stock transfer clients do not have to do anything at this point but watch, and listen.  The people, systems, facilities and services offered heretofore will remain unchanged until a presumably well-crafted program of integration is presented to them, and executed.  For EQ clients this also means they will no longer wonder whether EQ’s 2018 acquisition of Wells Fargo’s stock transfer business was a success (fueled by rumblings it was not); and for AST clients it means they know PEP is finally exiting an investment it has wanted to for a long time, eliminating that irritating uncertainty.  This removal of angst goes for the employees at both TAs as well.

So the future looks bright here.  Two transfer agents looking for a shot in the arm in their quest to compete against Computershare just got it.  The combination of AST and EQ in the U.S. could create an agent with almost 1,000 employees serving 2,700 corporations having 8.3 million shareholders, which while still smaller than Computershare’s 1,400 employees serving 3,400 corporations having 17.8 million shareholders is still, as a practical matter, more than enough critical mass for “Newco” to compete effectively and profitably.  It will be fun to see where we are with all this a year from now.

And a last word on competition.  Should we be worried that the “Big Five” transfer agents will now become the “Big Four”?  Yes, a little.  Having five agents has kept down pricing, mitigated against penal contract terms and, frankly, tempered a natural hubris exhibited by the largest of agents.  On the other hand, the “new kid in town” should try to woo new business for quite a while with meaningful enticements to prospective clients.  Moreover, Broadridge and Continental Stock Transfer, the other members of the large U.S. transfer agent community, are not going anywhere and will undoubtedly pick up new business through their own redoubled marketing efforts, and product and service R&D.  Also, there are some smaller transfer agents which have stepped up in the last few years that can now handle medium-sized stock transfer clients.  So, again, all is well for the time being.  Of course if, in the large agent category, the four ever went to three, or God forbid two, that would be a different story, and an unfortunate development with potentially serious consequences.