The merger of The Bank of New York and Mellon Bank that was announced last week is expected to create the world's largest asset custodian and corporate trustee.
The merged entity will also be a top 10 global asset manager and the 11th largest financial institution in the U.S. It will based in New York and operate under the name The Bank of New York Mellon Corp. The new company is expected to have more than $16.5 trillion in assets under custody and more than $1 trillion in assets under management across offices in 36 countries.
This combination of equals will result in a substantial cost savings for the two companies. Roughly 80% of the cost savings are expected to come through the joining of servicing related businesses. JPMorgan Securities analysts last week estimated the savings would represent roughly 9.4% of combined servicing related expenses and 33% of Mellon's servicing expenses, based on third quarter figures. Total cost savings from the merger are expected at about 8.5% of the combined companies' estimated 2006 expenses.
Mellon Bank shareholders will receive one share in the new company, while BNY shareholders will receive 0.94 shares for each share held. Bob Kelly is going to be the chief executive of the company upon the merger and become chairman 18 months later. Meanwhile, Gerald Hassell will become president, responsible for servicing related businesses, and Bruce Van Saun will become chief financial officer. The new company will retain the head of asset servicing at each institution as co-heads. Tom Renyi, BNY's chairman and chief executive, and Mellon Senior Vice Chairman Steve Elliott will retire after 18 months, according to JPMorgan.
BNY was expected to have the largest corporate trust by market share through the acquisition earlier this year of JPMorgan's corporate trust business, a combination that was expected to total some $8 trillion of debt issues and substantially increase BNY's client base - particularly within the CDO sector, where BNY will begin working toward a near-term goal of 60% market share, Karen Peetz, executive vice president and head of corporate trust at BNY, said at the time.
In an asset swap agreement, JPMorgan acquired BNY's consumer, small business and middle-market banking businesses in exchange for its corporate trust business, plus a $150 million cash payment. The BNY businesses were valued at $2.3 billion, while the JPMorgan businesses were valued at $2.15 billion, according to JPMorgan.
That acquisition was be the company's 47th since 1994 - because of its growth potential, profit margins and positive future prospects. BNY President Hassell said during a conference call at the time that the bank was aiming to increase its global presence within the capital markets sector. He added that he believes the company will be shifting from a "very traditional commercial bank to a broad-based global financial services company."
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