Bank of New York to Merge with Mellon Financial

Weekly Corporate Growth Report, Dec 11, 2006

The Deal: The Bank of New York Company has entered into a merger agreement with Mellon Financial Corporation. The merger will create a combined company named Bank of New York Mellon. Under the terms of the areement, each share of Mellon Financial will be exchanged for one share of the new company and each share of Bank of New York will be exchanged for 0.9434 shares of the new company. After the transaction closes, current holders of Bank of New York will own about 63 percent of the combined entity. The boards of both companies have approved the deal, which is expected to close in the third quarter of 2007.

Discussion: Mellon Financial provides a range of financial services such as asset management and treasury services. The company has reduced its traditional banking operations to focus on fee-based services.

The Bank of New York focuses on investor services and wealth management. The company offers trust services, asset management, and investment banking. Company subsidiaries include investment bank BNY Capital Markets, securities firm Pershing, and BNY Asset Management.

The merger of Mellon and the Bank of New York will create a company with $16.6 trillion in assets under custody and annual revenues of more than $12 billion. The companies expect the merger to yield annual cost savings of about $700 million. The combined company's work force will be reduced by about 3,900 employees over three years.