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May 28, 2014

AST to acquire proxy solicitation firm DF King

The deal is being driven by growing needs of issuers amid accelerating regulatory changes, investor activism and share migration

On May 27 American Stock Transfer & Trust Co. announced a definitive agreement under which its affiliate, AST Fund Solutions, will purchase DF King’s operating businesses, creating the largest issuer and shareholder services firm across North America and Europe. AST is CST Trust Co.’s US affiliate.

DF King, which opened its doors as an issuer and shareholder services provider in 1942, will be integrated and operate immediately with ASTOne, a division of AST that offers a diverse menu of proxy solicitation, ownership intelligence and corporate governance services. The combined business will provide a broad array of specialized advisory services, including proxy solicitation, corporate governance, proxy contests and corporate actions.

The combined company ‘unifies respective strengths and creates a powerhouse of leadership and specialized advisory, operational and communications expertise in both the US and Canada,’ CST Chairman Mark Healy said in a statement. ‘A clear industry leader with deep bench strength has been missing in this sector of the Canadian market.’

The deal will give DF King clients access to other issuer and shareholder services that CST and AST provide such as registrar and stock transfer, equity plan administration, corporate actions, asset recovery, ownership intelligence and investment management.

DF King Chief Executive Asher Richelli in a statement cited changes in demand for issuer services being driven by shareholder activism, the pace of new regulation and the increasing complexity of global financial markets as one reason for the deal.

The transfer agent industry’s registered shareholder base has been declining by 5 percent annually, according to Carl T Hagberg & Associates, which has been driving a wave of consolidation and edging all but the largest providers out of the market. The DF King deal comes just three months after MDC Partners announced its acquisition of a majority partnership interest in Kingsdale Shareholder Services, the leading Canadian proxy solicitation firm based in Toronto.

The ongoing migration of shares from individual retail owners to mutual fund companies, multiple layers of ownership and rising demand for around-the-clock communication with issuers has made it increasingly challenging for firms like DF King to continue to fulfill their clients’ expanding needs.

Speaking to Corporate Secretary last December, Healy said, ‘We came out with ASTOne for the single purpose of saying you can get all of your advisory, solicitation and IR solutions under one roof.’  By providing multiple points of entry, AST hopes to attract a wider range of clients who may initially seek out AST for a specific need such as advisory work but will be able to eventually take advantage of assorted other services the company offers, he added.

To acquire the market intelligence needed to expand its client base, AST and the Executive Advisory Council, an independent advisory group that AST sponsors, are conducting a thorough study that aims to gain more insight into the needs of North American issuers and shareholders.

The deal is expected to close by the end of June. Both AST and DF King declined to comment on the proposed transaction price.    

There are no functional changes planned at DF King, says a spokeswoman for AST. ‘Right now, we’re just excited to have the new team on board,’ she adds.