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Broadridge Buys TwoFour Systems; To Offer Fx Solutions - Analyst Blog

Zacks Equity Research
Updated

New York-based global outsourcing service provider Broadridge Financial Solutions Inc. (BR) announced the completion of acquisition of TwoFour Systems LLC, a real-time foreign exchange solution provider to banks and broker-dealers, on Dec 30. The financial terms of the deal have not been disclosed.

TwoFour Systems is the technology subsidiary of TwoFour Holdings LLC and specializes in providing flexible workflow-based transaction processing software for foreign exchange, exchange-traded futures and options, metals, interest rate derivatives and money market instruments.

Broadridge stated that TwoFour Systems will be branded as Broadridge FX and Liquidity Solutions and operate under its Global Technology and Operations division. Per the company, the acquisition is in line with its strategy of providing multi-asset class solutions to its clients by offering innovative technologies and generating strong internal return rates.

We remain encouraged by Broadridge’s acquisition spree through which the company expands its product portfolio and customer reach. Last year, Broadridge acquired Emerald Connect, LLC for $60 million in cash, which strengthened its foothold in the advisory market. This acquisition has helped Broadridge to evolve as a financial and outsourcing services provider, which in turn helps it to eliminate business risks.

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The company’s strong balance sheet and cash generating abilities — cash balance of $331.3 million at the end of first-quarter fiscal 2015 — have enabled it to pursue strategic acquisitions.

Further, we believe that Broadridge’s cost reduction initiatives and solid growth in net new businesses are the positives, going forward. We remain optimistic on Broadridge’s strategic takeovers, product launches, share repurchase program and dividend hikes. We also believe that its close association with Accenture (ACN) will create long-term opportunities.

However, we remain concerned by the pricing pressure caused by stiff competition from the likes of Barrett Business Services (BBSI) and DST Systems Inc. (DST).

Further, the company’s first-quarter fiscal 2015 results were mixed, wherein the bottom line matched the Zacks Consensus Estimate, but the top line surpassed the same. Moreover, the year-over-year comparisons were unfavorable.

Currently, Broadridge carries a Zacks Rank #4 (Sell).


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