New York – 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 deeply steeped in American 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, meanwhile, 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.
But the companies also said in announcing the deal Monday that they expect it will result in the elimination of about 3,900 jobs, or nearly 10 percent of their combined workforce 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 Monday by sending shares in Bank of New York up $4.27 to close at $39.75 on the New York Stock Exchange. Shares in Pittsburgh-based Mellon rose $2.73 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 price at Friday’s closing price.
Analyst David George with A.G. Edwards & Sons Inc. in St.Louis upgraded Mellon Financial to “buy” from “hold,” saying, “From our perspective, this is an excellent transaction as it creates a securities-servicing and asset-management behemoth that can rival any bank or asset manager in the world.”
Several ratings agencies affirmed or boosted their ratings 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 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 Renyi when he retires.
