State Street Corp. is buying Goldman Sachs’ hedge fund administration business for US$550 million in cash.
The deal should be finalized early in the fourth quarter, and it is expected to be accretive in the first full year of operation. The business, known as Goldman Sachs Administration Services (GSAS), administers approximately US$200 billion in single manager hedge fund assets on behalf of approximately 150 investment managers. Its employees are expected to join State Street following the close of the transaction.
State Street says that the deal, which does not include Goldman Sachs’ prime brokerage business, will make it the top hedge fund administrator globally based on industry survey data.
Both firms also reported their latest earnings today. Goldman reported net earnings of $962 million for the second quarter, on net revenues of $6.63 billion. Diluted earnings per common share were $1.78 compared with $1.85 for the second quarter of 2011 and $3.92 for the first quarter of 2012. Annualized return on average common shareholders’ equity was 5.4% for the quarter, and 8.8% for the first half of 2012.
“During the second quarter, market conditions deteriorated and activity levels for both corporate and investing clients were lower given continued instability in Europe and concerns about global growth,” said Lloyd Blankfein, chairman and CEO of Goldman Sachs.
State Street Tuesday announced second quarter earnings per share of 98¢, down 2% from $1.00 in the second quarter of 2011 and up 15% from 85¢ in the first quarter of 2012. Revenue in the quarter was $2.42 billion, down 3% from $2.49 billion in the second quarter of 2011 and nearly flat with the first quarter of 2012.