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State Street agrees to buy Charles River for $2.6B

(Bloomberg) -- State Street Corp. fell the most in almost three years on plans to spend $2.6 billion to acquire Charles River Systems Inc., a provider of investment data and analytics software.

The bank expects to suspend about $950 million of share repurchases and issue common and preferred equity to finance the deal, State Street said in a statement Friday. It also issued second-quarter results that exceeded analysts’ estimates.

Financial companies are bolstering their use of technology to help clients assess risk and analyze assets. For Boston-based State Street, the purchase allows it to better compete with rivals who have relied on technology to serve clients. BlackRock Inc. has long been in this arena with its own software, known as Aladdin.

“Investment managers are under pressure to do more things with a single touch,” State Street Chief Executive Officer Jay Hooley said on a conference call. “There is a clear trend in the world to create more integration.”

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State Street fell as much as 9 percent, the biggest drop since August 2015. It was down about 7 percent to $86.06 at 9:45 a.m. in New York. Before today, the stock was down 5 percent this year.

“Information delivered in a useful way is the most powerful tool we can provide to the market.,” Ronald O’Hanley, State Street president, said on the call.

But the addition of Charles River is being viewed by Wall Street with some skepticism. “The Charles River acquisition is interesting and can make some strategic sense, but not a slam dunk in our view,” Evercore ISI analysts including Glenn Schorr wrote in a report Friday. There remain questions as to how the integration will work and how the firm will price the product, they said.

“The suspension of the buyback is not helping today’s performance,” said Gerard Cassidy, an analyst with RBC Capital.