Mellon and New York bank create giant with $16bn deal

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The Independent Online

Bank of New York unveiled plans to buy its rival Mellon Financial for some $16.5bn (£8.3bn) yesterday, creating a global banking powerhouse with combined assets of $16.6 trillion.

The new company, to be called Bank of New York Mellon Corporation, will be the world's largest custody bank, and one of the 10 largest global fund managers.

Under the terms of the proposal, which has been recommended by the Mellon board, Bank of New York shareholders will get 0.9434 shares in the new company for every New York share they own. Mellon shareholders will get one new share for every Mellon share.

The deal, which comes almost 10 years after Mellon rejected an unsolicited bid from Bank of New York, has been unanimously approved by both boards and will complete in the third quarter of next year if approved by shareholders and regulators.

About 3,900 of the combined group's 40,000 employees will be laid off over the next three years as a result of the deal, and the company expects to reduce its pre-tax costs by some $700m a year. However, the deal is also expected to incur one-off costs of $1.3bn.

Thomas Renyi, Bank of New York's chairman and chief executive, will be executive chairman of the new company for 18 months after the deal completes. Robert Kelly, Mellon's chairman and chief executive, will be the new company's chief executive and will succeed Mr Renyi as chairman.

Mr Renyi said: "Our companies focus their businesses in highly attractive sectors of the financial services industry. Together, we will be the global leader in securities servicing, and one of the top providers of asset and wealth management worldwide ... we will have the scale, the technology, the capital, and the people ... to compete and win in the rapidly expanding global marketplace."

Mr Kelly added: "Through this merger, we will be able to invest and expand more effectively than any of our competitors due to our combined scale, profitability and global reach. The organic growth of our respective companies is already strong, and the cost savings and revenue synergies opportunities are excellent."

Investors reacted positively yesterday, with shares in both companies rising sharply. Analysts also welcomed the deal. Gerard Cassidy, an analyst at RBC Capital Markets, said it was a "complementary combination that, with strong leadership, could produce above-average earnings growth."

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