The Bank of New York Mellon Corp. (BK) Tuesday revealed a definitive agreement to acquire PNC Financial Services Group Inc.'s (PNC) Global Investment Servicing Inc., or GIS, business for about $2.31 billion. The purchase price includes the purchase of $1.57 billion of stock and repayment of intercompany debt from PNC.
According to BNY Mellon, GIS is the largest single-source provider to the U.S. mutual fund industry and is a premier servicer of the global investment industry with leading positions across subaccounting, fund accounting/administration, custody, managed account services and alternative investment services.
When the deal is completed, BNY Mellon is expected to be the No. 2 provider in fund accounting, administration and transfer agency. It will add $855 billion in assets under administration, including $460 billion in assets under custody. The company also will be doubling the number of funds serviced for accounting and administration. Thanks to the acquisition, BNY Mellon will increase its managed account assets to $80 billion and double its European asset base.
According to Robert Kelly, BNY Mellon Chairman and Chief Executive Officer, "This acquisition significantly strengthens our service offering and market share with asset managers and financial advisors, while delivering attractive returns to our shareholders. We expect the transaction to accelerate our growth, deliver economies of scale and strengthen our leadership position for Asset Servicing and Pershing."
The all-cash acquisition will be accretive in the first year, the company said. It is expected to close in the third quarter of 2010. BNY Mellon plans to raise about $800 million in equity as part of the transaction.
GIS has about 4,500 employees. It is based in Wilmington, Delaware and has locations across the U.S. and Europe.
Stephen Wynne, current CEO of GIS, will remain in that role. He will report to Tim Keaney and Jim Palermo, co-heads of BNY Mellon Asset Servicing.
Reports had appeared last week speculating that BNY Mellon was planning to buy GIS. As PNC recently disclosed its intention to repay $7.6 billion received in TARP funds, it was believed that the GIS sale would help the company raise cash to pay back the government aid.
Last month, Bank of New York Mellon Corp. reported a surge in fourth-quarter profit, helped by higher revenues and the absence of last year's hefty net securities losses. The company's net income applicable to common shareholders surged to $593 million or $0.49 per share from $28 million or $0.02 per share reported last year. Total revenues for the quarter increased to $3.319 billion from $2.864 billion in the same period last year.
PNC Financial last month reported a profit for the fourth quarter, compared to a loss last year, as revenues surged on higher than expected cash collections for impaired commercial loans.
BK closed Monday's regular trade at $29.58, up from the previous close of $29.09, on 6.98 million shares.
Shares of PNC ended Monday higher at $55.86, compared to the previous close of $55.43, on 5.03 million shares.
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