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.