U.S. Bank agreed to acquire the corporate trust, institutional custody and other business units of Wachovia Corp. for $720 million in cash, with up to an additional $80 million payable in one year based on how much business is retained.
"This solidifies our leadership position in corporate trust and increases the scale of our institutional custody business," Diane Thormodsgard, president of U.S. Bank Institutional Trust and Custody, said in a telephone interview. "We go from $300 billion assets under custody to $940 billion, which puts us up there very strongly in the middle market." The deal will also help the bank fill geographic gaps in the mid-Atlantic and southern regions of the United States, she added.
"We see this as a pretty low-risk transaction," Ms. Thormodsgard said.
The deal, which is subject to regulatory approval, is expected to close in December. In addition to corporate trust and institutional custody, it includes Wachovia's document custody and structured finance trust services units, all of which were part of Wachovia Capital Management Group.
Wachovia's corporate and institutional trust business "was profitable and very steady, but when we looked at how the Capital Management Group was comprised, we determined we didn't have the scale or business projections to take the business where it needed to go," said Jim Griffin, Wachovia spokesman.
With the sale, Wachovia Capital Management Group will consist of Wachovia Securities, the retail brokerage; Evergreen Investments, the $250 billion money manager; and Wachovia Retirement Services, the firm's institutional retirement business.
