Northern Trust Corp., the third-largest independent U.S. custody bank, agreed to acquire Omnium LLC from Ken Griffin’s Citadel LLC for at least $100 million to double the assets it oversees for hedge funds.
Northern Trust, based in Chicago, may make further payments tied to the performance of Omnium, Doug Holt, a spokesman for the firm, said today in an interview. The deal, which will add $70 billion to its hedge-fund servicing assets, is set to be completed in the third quarter.
Northern Trust and its biggest competitors, State Street Corp. and Bank of New York Mellon Corp., are acquiring companies to boost profit as near-zero interest rates erode profits on money funds, securities lending and fixed-income investments. Northern Trust in December bought investment firm Waterline Partners LLC, and in February agreed to buy the securities-servicing unit of Bank of Ireland Plc.
“The hedge-fund industry has changed rapidly in the past five years, driving the need for increasingly sophisticated solutions,” Steven L. Fradkin, president of Northern Trust’s corporate and institutional services group, said today in a statement.
Northern Trust rose 39 cents to $48.63 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have declined 12 percent this year, while the 18-member Standard & Poor’s index of asset managers and custody banks is down 1.2 percent.
BNY Mellon, based in New York, last year bought BHF Asset Servicing GmbH and in 2009 acquired Pittsburgh-based PNC Financial Services Group Inc.’s investment-servicing business. State Street, based in Boston, last year added the securities-servicing unit of Italy’s Intesa Sanpaolo SpA and Mourant International Finance Administration in the U.K.’s Channel Islands. BNY Mellon and State Street are the biggest and second-biggest U.S. custody banks.
Griffin, who founded Citadel as a hedge fund in 1990, started Omnium in 2007 to provide other funds with administration and monitoring services. He has also expanded the Chicago-based firm by opening a securities unit to advise corporations on mergers and acquisitions, underwriting and trading stocks and bonds. That unit has been subject to 10 high-level executive departures since it was created at the height of the financial crisis in 2008.
Custody banks keep records, track performance and lend securities to institutional investors such as mutual funds, pension plans and hedge funds. Northern Trust had $4.36 trillion in assets under custody as of March 31.