State Street Corp. announced Monday it is taking over Investors Financial Services for $4.5 billion in stock.

When the deal closes, State Street will manage one-third of the $10.4 trillion mutual fund industry and one-quarter of the $1.3 trillion hedge fund industry; the acquisition will add $2.2 trillion in custody assets for the firm.

State Street said the deal will not add to its earnings until 2009 but that after it merges staff, technology and real estate, in the first two years after the deal closes by the third quarter of this year, the company expects between $345 million and $365 million in pretax cost savings.

Earlier this year, State Street announced its planned acquisition of Currenex, a foreign exchange vendor, for $564 million.

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