NEW YORK: The Bank of New York and Mellon Financial Corp. are merging in a stock deal to create the largest securities servicing company and custodial bank in the world.
With a market capitalization of $43 billion, it will also be the 11th largest financial institution in the U.S. it will be named the Bank of New York Mellon Corp.
The deal provides for the Bank of New York shareholders to receive 0.9434 shares of the new company, while Mellon shareholders will receive one share for each of the shares they hold in their respective companies.
The merged company will have assets worth $1.1 trillion under its management and $16.6 trillion in assets under custody. It will have its headquarters in New York, while there will be large office establishment in Pittsburgh, the current headquarters of Mellon.
Bank of New York is the oldest bank in the U.S. It is a major provider of clearing services, or back office trade execution services, to small brokerages and hedge funds. It had recently sold its retail branches to JPMorgan Chase for $3.1 billion and got JPMorgan's corporate trust business.
While the bank's current chairman and chief executive Thomas Renyi will be the executive chairman of the new bank, Robert Kelly, chairman and chief executive of Mellon, will be the chief executive officer and will succeed Renyi as chairman.
The two firms intend to implement a restructuring program that will cut some 3,900 jobs over three years. The companies have staff strength of 40,000 now.
The companies expect that they will now be able to invest and expand more rapidly than its competitors. They also expect to reduce total pre-tax costs by around $700 million a year, equivalent to roughly 8.5 per cent of the estimated combined expense base in 2006.
The deal is expected to complete in the third quarter of 2007.
