Unconfirmed report says DST Systems is shopping its output business

A published report Thursday said Kansas City-based DST Systems is considering a sale of its customer communications division, formerly called DST Output. It employs about 30 percent of DST’s workforce, including many in the Kansas City area.

Bloomberg News said DST Systems hired a financial adviser in recent months to seek potential bidders for the division. Bloomberg cited “people familiar with the matter” who asked not to be identified because the matter is not public.

A DST spokeswoman declined to comment on the report.

Globally, DST has 13,400 employees, including 4,100 in its customer communications division, the firm’s recent annual report to the Securities and Exchange Commission said. The jobs include 2,500 in the United States, including an unknown total in the Kansas City area.

The customer communications division also accounts for about 30 percent of DST’s operating revenues, or roughly $600 million. Its work for client companies includes printing, mailing and electronic distribution of communications materials to those clients’ customers.

Bloomberg, citing sources, said the division could sell for as much as $500 million.

Analyst Peter Heckmann at Avondale Partners LLC in Overland Park said he thought that price would be “toward the low end” of what another company in that business would be willing to pay. Still, a sale probably could help DST’s stock price because the customer communications business generally is less profitable than other businesses DST runs.

“A good portion of the volumes are unrelated to DST’s core operations in financial and health care data processing, and investors view it as a business in long-term secular decline as more paper goes electronic,” Heckmann wrote in a note to clients.

DST had said with its latest financial report that 2016 could be a challenging year for the company.

Its data processing work includes providing record keeping, transactions processing and other back office services to health care and financial services companies, including mutual fund firms.

Proceeds from a sale of the customer communications division could help DST pay off debts or buy back its own shares in the stock market. The company has been shedding non-core assets, such as stock it owns in other businesses and real estate not used by DST operations. It has used that money for debt repayments and stock buybacks.

DST’s shares fell 44 cents Thursday, closing at $111.33. The company’s total shares are worth about $3.8 billion.

This story was originally published April 7, 2016 at 4:21 PM with the headline "Unconfirmed report says DST Systems is shopping its output business."