BNY Mellon has agreed to buy BHF-Banks asset servicing arm for $343 million. The deal will also include BHF Asset Servicing wholly owned fund administration affiliate, Frankfurter Service Kapitalanlage-Gesellschaft mbH (FSKAG).
According to Moritz Ostwald, head global sales management at BHF Asset Servicing, talks regarding a deal between the two banks have been in progress for two years.
The agreed acquisition does not come as a surprise. BHF-Bank and BNY Mellon have been working together since 2009 after signing an agreement to pool services, including transition management, commission recapture and futures clearing. At the time, Wolfgang Danicke, Managing Director of BHF Asset Servicing, said: “We intend to further enhance the traditionally good cooperation between our two companies. The competencies and expertise each bank brings to the partnership ideally complement each other.”
BHF-Bank assets servicing relationship with BNY Mellon stretches back to 2004, when ING-BHF Bank appointed Bank of New York as global custodian. BHF Bank was spun out of ING the same year, and in 2005 retained some of the German sub-custody business of the Bank of New York, despite the latters European custody joint venture with ING.
The new deal between BNY Mellon and BHF Asset Servicing sees BNY Mellon greatly expand its European exposure. The combined deal puts assets under custody at $642 billion of the combined total $427.5 billion comes from BHF Bank. Of assets under administration, FSKAG holds $44.9 billion of the potential $170 billion combined total. BHF Asset Servicing depotbank, with $128 billion, is one of the biggest growth areas for BNY Mellon – the U.S. bank previously held only $35 billion in Germany.
The recent AIFM Directive has stated that a fund manager must have an appointed depository, making fund administrators and depotbanks attractive targets in Europe.
The deal is expected to close in Q3 2010. According to Ostwald, BNY Mellon is keeping the complete BHF Asset Servicing infrastructure, which has been founded in late 2008, and is being acquired 100% with all the employees, clients and infrastructure by BNY Mellon.
The unit will be headed by Michelle Grundmann from BNY Mellon, and Juergen P. Frank and Christopher V. Friedrich from BHF Asset Servicing.
Grundmann said of the deal: Weve had a successful relationship with BHF-BANK for more than seven years and this transaction was the next logical step for our growing business, one that further underlines our long-term commitment to the German market.