M&A

2 November, 2009

UPDATE 1-Penson enters into strategic deal with Broadridge

* Penson to buy Ridge's securities clearing contracts * To outsource certain back office functions to Broadridge

* Sees deal to add modestly to Penson EPS in first year

* Broadridge Q3 profit in-line with est, Penson misses

Nov 2 (Reuters) - Penson Worldwide Inc (PNSN.O) said it entered into a strategic deal with Broadridge Financial Solutions Inc (BR.N), which will see Penson taking over clearing contracts from Broadridge's Ridge correspondent clearing and execution business for about $60-$70 million.

The deal also sees Broadridge supplying back office technology services and certain securities processing functions to Penson's US, Canadian and UK securities clearing brokers for 10 years.

The deal, which will see Penson becoming the United States' No. 2 securities clearing firm, is expected to modestly add to Penson's earnings per share in the year following closing.

Penson said it expects to raise additional regulatory capital of about $50 million to support the Ridge business, with the company having the option of borrowing this amount from Broadridge if it fails to raise the amount by deal closing.

The agreement is likely to result in about $6 million to $10 million in incremental positive cash flow during the first year, increasing to an estimated $15 million to $20 million by the third year.

Separately, Broadridge reported a third-quarter profit that was in-line with the consensus estimates, backed its full-year adjusted profit view and upped its revenue outlook for the period. [ID:NWNAB8653]

Quarterly profit at Penson Worldwide, however, fell short of analysts' estimates, hurt in part by a dip in net interest revenues from customer balances. [ID:NWNAB8645]

Penson shares closed at $9.73 Monday on Nasdaq, while those of Broadridge closed at $20.83 on the New York Stock Exchange. (Reporting by Anurag Kotoky and Adveith Nair in Bangalore; Editing by Anthony Kurian) ((anurag.kotoky@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: anurag.kotoky.thomsonreuters.com@reuters.net))

Source: http://www.reuters.com