Broadridge Financial Solutions has completed the previously announced sale of the contracts of substantially all of the securities clearing clients of its subsidiary, Ridge Clearing & Outsourcing Solutions, to Penson Financial Services (PFSI), a subsidiary of Penson Worldwide, for an aggregate purchase price of approximately $35.2m.
In addition, Broadridge also executed an 11-year global outsourcing services contract to provide securities processing and back-office support services to PFSI. The outsourcing services contract includes operations support and turn-key processing services for the securities clearing client contracts acquired by PFSI from Broadridge as well as PFSI’s existing securities clearing clients.
PFSI will utilize Broadridge’s technology platform and staff to service the acquired clients and PFSI expects to convert its existing clients to Broadridge’s platform during 2011. Broadridge expects the global outsourcing services contract to generate approximately $50m to $55m in annual revenue when PFSI’s clients are fully converted onto Broadridge’s securities processing platform.
With the closing of the sale, Broadridge exits the securities clearing business. As a result, it is expected that Broadridge will gain access to net cash estimated in the range of $210m to $240m previously committed by Broadridge to the securities clearing business as regulatory capital.
In connection with the closing, the parties entered into agreements to revise certain terms of the original transaction agreements, including finalizing the list of correspondent contracts to be sold to PFSI, agreeing on certain terms of the contracts signed at closing, and deferring the delivery of certain agreements pending further discussions.
Joseph Barra, president of Ridge Clearing & Outsourcing Solutions, said: “This transaction is aligned with the strategic objectives of both Broadridge and Penson. For Broadridge, this creates considerable momentum for our securities processing and outsourcing strategy, while Penson continues their long track record of success in growing their global clearing business.”