Bank of NY and Mellon Unite to Create Financial Powerhouse

The Bank of New York Company, Inc. and Mellon Financial Corporation on Monday entered into a merger deal worth $16.5 billion to create the world's largest securities servicing and asset management firm.The

The merger, which combines two popular financial institutions in American history to create a global banking powerhouse, is projected to be completed by mid-2007.

The newly merged company, to be called "Bank of New York Mellon Corporation," will be the world's largest custody bank with combined assets of $16.6 trillion, outstripping JPMorgan Chase & Co.

It will also rank among 10 largest global fund managers with more than $1.1 trillion in assets under management.

The two companies’ boards have unanimously approved the merger deal, but approval by regulators and shareholders is still required.

Sixty years old Thomas A. Renyi, Bank of New York's active chairman and chief executive, will serve as executive chairman of the new company for 18 months after the deal completes. And, Mellon's chairman and chief executive, Robert P. Kelly, 52, will be Bank of New York Mellon Corporation’s chief executive and will succeed Mr. Renyi as chairman of the board. Gerald L. Hassell, president of Bank of New York, will retain his current position in the new company.

In the new company’s board, Bank of New York will designate ten members, while Mellon will designate eight.

As per the terms of the deal, Bank of New York shareholders will own 63 percent of the new company, while Mellon will own 37 percent. The Bank of New York’s shareholders will get 0.9434 of a share, and Mellon shareholders will get one share in the new company for each Mellon share they own.

The new company’s headquarters will be based in New York, but cash management and stock transfer units will be in Pittsburgh, where Mellon is based. The company will derive its annual revenue from asset and private wealth management (about 29%), from asset servicing (28%), from treasury and clearing services (20%) and from issuer services (18%).

Nearly 3,900 workers or nearly 10 percent of their combined work force of about 40,000 will be eliminated over the next three years as a result of the deal, the companies said.

The companies also expect the new Group would reduce its pre-tax costs by some $700m a year. They also said the deal will result in restructuring charges of about $1.3 billion.

Founded by Alexander Hamilton in 1784, Bank of New York is the oldest bank in the United States. The bank is the global leader in providing a comprehensive array of services that enable institutions and individuals to move and manage their financial assents in more than 100 global markets.

Headquartered in Pittsburgh, Mellon Financial Corporation was founded by the famous family of financiers and philanthropists in 1869. Mellon is a global financial services company, providing financial services to institutions, corporations and high net worth individuals.

In yesterday trading, shares of Bank of New York jumped $4.27 or 12 percent to close at $39.75, while Mellon Financial shares closed up $2.73, or 6.8 percent, at $42.78.