- The Washington Times - Monday, December 4, 2006

NEW YORK (AP) — Bank of New York Co. has agreed to take over Mellon Financial Corp. for stock valued at $17.6 billion in a deal that will create the world’s largest securities servicing company and one of the biggest asset managers.

The combination, which is expected to be completed by the middle of next year, combines two financial institutions that are steeped in U.S. history. New York-based Bank of New York was founded in 1784 by Alexander Hamilton, who went on to become the first secretary of the U.S. Treasury. Mellon Financial has been around since its 1869 founding by the Mellon family of financiers and philanthropists.

The new company — which will preserve links to that heritage by calling itself the Bank of New York Mellon Corp. — will be the world’s leading asset servicer with $16.6 trillion in assets under custody.

It also will rank among the top 10 global asset managers with more than $1.1 trillion in assets under management.

The companies also said in announcing the deal yesterday that they expect it will result in the elimination of about 3,900 jobs, or nearly 10 percent of their combined work force of about 40,000. They said reductions would be made through normal attrition “wherever possible.”

The deal has been approved by each company’s board of directors, but requires approval by regulators and shareholders.

Investors appeared to signal support by sending Bank of New York shares up $4.27, or 12 percent, to close at $39.75 on the New York Stock Exchange. Shares in Pittsburgh-based Mellon rose $2.73, or 6.8 percent, to close at $42.78 on the NYSE.

The rise in Mellon’s price boosted the value of the deal to $17.6 billion from the $16.5 billion at Friday’s closing share price.

Several ratings agencies affirmed or boosted their readings for the merging banks. Standard & Poor’s Ratings Services affirmed the ratings of both banks and said the outlook was stable; Fitch Ratings affirmed the ratings of both banks and assigned a “positive outlook” to them; Moody’s Investors Service affirmed its ratings on Bank of New York and put Mellon on review for “positive upgrade.”

The announcement also said that Thomas Renyi, chairman and chief executive officer of Bank of New York, would lead the merger integration team as the new institution’s executive chairman for 18 months. Mellon’s chairman and chief executive, Robert P. Kelly, will be CEO of the merged bank and then replace Mr. Renyi when he retires.

Mr. Renyi, 60, has been CEO of the New York bank since 1997 and chairman since 1998. Mr. Kelly, 52, who had been chief financial officer of Wachovia Corp. in Charlotte, N.C., took over at Mellon in February with the retirement of longtime Chief Executive Officer Martin G. McGuinn.

Mr. Kelly said the new company would take advantage of the different strengths of the two institutions.

“Mellon is huge in asset management and having a nice asset servicing ability as well,” he said. “In contrast, Bank of New York is huge on the asset servicing side and security servicing but smaller in asset management.”

LOAD COMMENTS ()

 

Click to Read More

Click to Hide