Daiwa Securities Group has sold its global asset services division to Sumitomo Mitsui Trust Bank (SMTB), after letting go of its synthetic prime brokerage arm in December.
In November of last year, the group announced that it would cut 300 jobs, including 30 employees from its prime brokerage arm, after it posted a third-straight quarterly loss.
The company went on to sell its prime brokerage business, which served hedge funds, to Canada's Bank of Nova Scotia for an undisclosed sum.
On the 29 June 2012, SMTB signed a share purchase agreement with Daiwa for two entities, Daiwa Securities Trust & Banking (Europe) and Daiwa Securities Trust Europe.
The entities collectively form its global asset servicing division, which includes Daiwa’s fund administration/ UCITS management company, its custodian, its trustee and its authorised corporate director entities domiciled in Dublin and London.
The agreement does not include the US subsidiary of Daiwa Securities Trust & Banking (Europe). A spokesperson for Sumitomo said the company had not decided yet if it would let go of any personnel following the change.
Daiwa Securities Trust Europe has recorded negative net income year-on-year for the last two years, with €-1.18 million seen in March 2011 and €-303,000 in the same period in 2012.
A Daiwa spokesperson stated Daiwa's wish to focus on its core activities in retail, asset management and investment banking as the reason for the sale.
In a statement, Daiwa said that this is a “very positive development” for the asset servicing division, its staff and its clients, “given the strength and global presence of the acquiring company”.
It added: “The [asset servicing division’s] management team is working with SMTB on the 3 year roadmap which builds on our core foundation of operational and fiduciary excellence aswell as market penetration.”
“The key headline items for the future involve; developing synergies based upon the new parent’s stature as an established financial institution of size, developing existing and additional servicing capacities and utilising SMTB’s global business network. The other major focus will involve strategic investment in technology solutions."
“This transaction allows Daiwa to focus on its securities and investment banking products, however, Daiwa will continue to maintain the servicing of its offshore fund business with [the asset servicing division].”
SMTB offers custody services, primarily for clients in Japan, and through its deal with Daiwa, it “intends to newly expand into the field of providing fund services to overseas hedge fund companies”, according to an SMTB statement.
SMTB Group will look into offering clients in Japan overseas asset administration services, including fund administration. It plans to enhance the fund service-providing functions of the Daiwa Securities Trust Europe companies, and the existing custody service functions of the SMTB Group companies.
The acquisition price paid by SMTB is expected to be $37.5 million (JPY 3 billion), based on the related valuation by a third party. A statement from Sumitomo stated that it is estimated that an amount of approximately $24 million (JPY 1.9 billion) will be recorded as goodwill.
