State Street, the Boston-headquartered firm specialising in asset management and custody, is to acquire Intesa Sanpaolo’s Securities Services business, which has operations in Italy and Luxembourg, for approximately €1.28 billion ($1.87 billion) in cash.

State Street will acquire the global custody, depository banking, correspondent banking and fund administration portions of the ISPSS business, and said it expects to acquire around €11 billion in cash deposits at closing. Expected revenue from the business for 2009 is estimated to be approximately €293 million.

The deal is expected to close during the second quarter of 2010, subject to regulatory approval, upon which State Street said it will bolster the acquired business’s balance sheet with approximately €560 million of additional capital.

The acquisition of ISPSS forms part of State Street’s plans to increase its scale and presence in high-growth markets outside the US, Jay Hooley, the firm’s president and chief operating officer, said in a statement. He also said the deal would enhance State Street’s fund accounting and offshore fund servicing capabilities, and provide it with a long-term servicing relationship with ISP to service all of its investment management affiliates, including Eurizon Capital, a Italian fund manager with €135 billion in assets under management (as at end September 2009).

As the financial services industry picks itself up after the turmoil stemming from the credit crisis, the swirl of M&A activity continues to gather pace. While some firms have been forced to sell-off assets to shore up their balance sheets or pay back government funds, others have taken advantage of the opportunity to snap up businesses - which are perhaps undervalued - and press ahead with expansionary plans.