Broadridge Completes Matrix Deal - Analyst Blog

Last week Broadridge Financial Solutions Inc. (BR) completed the acquisition of financial services provider Matrix Financial Solutions Inc. for a cash consideration of roughly $201.0 million. Matrix and its subsidiaries will now operate as part of Broadridge's Investor Communication Solutions business.

Denver, Colorado-based Matrix Financial Solutions provides back-office, trust, custody, trading and mutual fund settlement services to banks, trust companies, registered investment advisors and third-party administrators (TPAs). Matrix deals with approximately 500 mutual fund houses, provides services to more than 300 financial institutions and manages roughly $100.0 billion of investor assets.

The acquisition will provide Broadridge with a wider array of data and distribution channel solutions for its mutual fund clients. Moreover, the added capacity will boost Broadridge's product offering to banks, TPAs and other institutional clients. Matrix' expert advisors and rich customer-base would be an added advantage, leading to solid return on investments for Broadridge.

Broadridge thinks the acquisition will have minimal impact on its GAAP net earnings for the remainder of its fiscal year ending June 30, 2011. The company expects roughly 9 cents and 4 cents accretion to its non-GAAP and GAAP net earnings, respectively, during fiscal 2012.

We remain encouraged by Broadridge's acquisition spree, with the help of which the company is expanding its product portfolio and customer reach. A few months back, Broadridge acquired NewRiver Inc. and strengthened its Investor Communication Solutions segment.

Despite the prospective synergies, which are expected to improve Broadridge's fundamentals, we are taking a cautious stand based on the company's first quarter earnings miss. We also believe that weaker market activity during the recession continues to impact the company's performance, as can be inferred from its dull fiscal 2011 guidance.

Additionally, Broadridge faces significant competition from companies such as HD Supply, DST Systems Inc. (DST) and State Street Corp. (STT), which has increased pricing pressures for the company. We believe that share prices will remain depressed until there is a positive turn in investor sentiment.

Currently, BMC Software has a Zacks #3 Rank, implying a short-term Hold recommendation.

 
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