KC-based DST Systems to sell its former Output operations

Kansas City-based DST Systems Inc. has agreed to sell its customer communications business, formerly called DST Output, for $410 million, including that division’s Kansas City operations.

The sale is to Broadridge Financial Solutions Inc., a publicly traded New York company that provides the kinds of printing, mailing and other customer communications services that the DST business provides.

DST is selling operations that employ 2,300 in Kansas City, California, Connecticut and Canada.

DST said in an announcement Tuesday that the sale should be completed in July. It declined to say how many employees work in the Kansas City operations being sold.

In an emailed statement, Broadridge said the purchase of DST’s operations would give it “more print facilities and enhanced production technologies” covering a larger geographic area than its current operations. One benefit would be faster delivery and continuity for its clients, the statement said.

Neither company would indicate whether Kansas City likely would see any job cuts.

DST reported in a filing with the Securities and Exchange Commission that it is paying a $1.5 million retention bonus to Manoochehr “Mike” Abbaei, the executive vice president who heads the customer communications business being sold. The payment ensures he remains at the business until the sale is completed.

Broadridge said in an emailed statement that Abbaei would continue to run the business. Broadridge said in its announcement that it anticipates finding $20 million in cost savings by combining the DST operations with its own. The business being sold generated $1.1 billion in revenue last year and $445 million of fee revenue.

DST’s local operations involved in the sale are housed in the Westside Business Park at 2600 Southwest Blvd. It opened in 2002 after an expensive cleanup and clearing of what had been described at the time as a weed-infested and forgotten railroad yard.

The site is listed on the National Register of Historic Places as the Kansas City Terminal Railway Co. Roundhouse Historic District.

DST Systems announced the sale on the heels of laying off 1 percent of its total workforce of about 13,420. Those job cuts were intended to strengthen its businesses’ operations and adjust to market conditions.

“The sale of the North American Customer Communications business is an important step in executing our well-defined strategy of focus and growth within our financial and health care services segments,” DST chief executive Steve Hooley said in the company’s announcement.

He said DST had decided to get out of the customer communications business and would sell its similar operations in the United Kingdom as well.

Analyst Pete Heckmann, who follows DST Systems and Broadridge at Avondale Partners LLC, said the deal makes sense for both companies.

For DST, its customer communications operations provided significantly lower profit margins than the other services it provides to the financial and health care industries. Heckmann said DST had worked diligently to boost the profit margins of the customer communications business before seeking buyers.

Heckmann said Broadridge has a large business printing and mailing proxy statements for publicly traded companies and for mutual funds.

Shares of both companies gained more than $1 after the morning news. DST shares gained $1.16 to $117.03. Shares of Broadridge gained $1.13 to $64.28.

Selling the U.S. operations will net DST Systems about $310 million after taxes, the company said.

This story was originally published June 14, 2016 at 9:12 AM with the headline "KC-based DST Systems to sell its former Output operations."