More Stock Transfer Agent Developments as 2012 Unfolds

The U.S. stock  transfer business had an eventful winter that we felt we should summarize for  our readers.   The biggest news was  approval of the BNY Mellon and Computershare merger by the U.S. Department of  Justice on November 8, 2011, and the signing of the actual merger agreement on  December 30, 2011.   This will give the  “New Computershare (USA)” approximately one third of the listed public companies  and two thirds of the registered shareholders in Corporate America.

To  the credit of former BNY Mellon and Computershare management and staff, the  merger is proceeding in a well-choreographed manner.   Fortuitously, the deal signing and related  announcement came just before the 2012 proxy season began in earnest, when the  last thing a corporation wants to do is tamper with its transfer agent  relationship.   The primary message from  BNY Mellon and Computershare to its clients was, therefore, “no change” – which  was and continues to be smart.   After  proxy season, during the slower summer months, Computershare can tell ex-BNY Mellon  clients when their shareholder accounts will be converted to Computershare’s record  keeping system (“SCRIP”), an inevitability that will achieve the necessary  operational synergies justifying BNY Mellon’s $550 million price tag.   Such “Phase 2” will require just as much care  as the Phase 1 deal negotiation and closure, in order to minimize any account  portfolio “flight” to transfer agent competitors.1

American  Stock Transfer & Trust Company (AST) has, for awhile now, been part of something  called The Link Group of companies, based in Australia.   So has Canadian Stock Transfer (CST), which  came into being in 2010 through the acquisition of CIBC/Mellon.   In 2011 The Link Group, Equiniti Ltd. of the  U.K. and Hong Kong’s Tricor created an entity called the Global Share Alliance (GSA),  which “…represents more than 40 million shareholders worldwide and serves  global businesses that require share registration and employee share plan  services in multiple territories using a common international platform.”   A March 14, 2012 press release announced that  AST and CST have now formally entered into GSA; and, while it remains to be  seen how closely this will mirror the international network Computershare  already possesses, it is clearly a move in that direction – which we  applaud.

Continental  Stock Transfer won the Sonoco Products Company account over the winter, a  sizable dividend paying and DRIP/DSPP company listed on the NYSE Euronext.   This is a good example of how, with “major”  U.S. transfer agents shrinking in number, two dynamics are playing out: 1) on  the supply side, smaller agents are impressively expanding their capacity and  functionality, while maintaining a small agent “feel”; and 2) on the demand  side, companies of all sizes are increasingly choosing smaller agents rather  than become a smaller fish in a bigger pond.   This trend will surely continue.

Indeed,  looking at Registrar & Transfer Company, they added over 180 new accounts in  the past three years, all through organic growth.   They eschew stock transfer portfolio  acquisitions, according to their President Tom Montrone (also a Securities  Transfer Association board member – as is Continental’s President, Steve Nelson2),  because they worry about how acquisitions might affect the service of their  existing clients.   Online connectivity  for corporations and their shareholders has recently been expanded at R&T  as well; and, they added a proxy solicitation affiliate staffed with industry  veterans (Eagle Rock Proxy Advisors) less than 20 months ago.

Citing another transfer agent of smaller size (smaller for now,  that is), Broadridge Corporate Issuer Solutions has added more than 125 new  clients since its acquisition of StockTrans two years ago, which moved  Broadridge into the stock transfer business for the first time.   They have hired experienced veterans to manage  the business like Peter Breen, Marlayna Jeanclerc and Linnette Samuels, so they  are definitely off to the races.   They  also know that to succeed on a fast track they need something “different,” so  are exercising their unique leverage as a beneficial as well as registered  shareholder record keeper on the proxy side in their stock transfer work.   In a nutshell, they are facilitating the  ability of shareholders to see their combined registered and beneficial share  positions under one roof and, we gather, move the split positions into one  beneficial account if desired, for ease of subsequent handling.

Finishing  up with major agent Wells Fargo, they are continuing a decade-long track record  of impressive organic growth.   While  occupying third place in the U.S. on the basis of a blend of corporate clients  and registered shareholders served, they rank first by our calculation in terms  of percentage of client portfolio inside the Fortune 1000.   This is likely due to Wells’ focus on  combining stock transfer with its other banking services, and logically the  larger the company the more Wells pitches its service “package.”   Wells has not just leveraged this cross-sell  dynamic, either.   It has made notable  recent strides enhancing its online systems and streamlining book-entry share  sale procedures, and joining the Global Share Alliance along with AST.   We have also been impressed with the extent to  which Wells supports many shareholder service industry associations, and  provides seminars and other educational media to its clients and stakeholders.

All  transfer agents that remain in this surprisingly complex, at times even  turbulent industry have “stepped up” their games lately – and will continue to  do so.   This has been prompted by the BNY  Mellon/Computershare merger, which now pits the “colossus” against everyone  else; having to respond to increased regulatory demands, such as more robust cost  basis record keeping; and the simple pressure to compete with brokers for the  patronage of more reluctant investors in stocks – by offering more  sophisticated online tools and making transaction processing a lot easier.

Stay tuned!

1We will hopefully be forgiven for pointing  out that many BNYM/Computershare clients are having Shareholder Service  Solutions perform a Shareholder Services Check-Up® or facilitate a  Request for Proposal exercise at this time, given the change this mega-merger  represents no matter how well it is being handled.

2STA board members are executives from  Computershare, AST, Continental, R&T, Wells Fargo, First American Stock  Transfer and Canadian Stock Transfer.