15 December, 2009

United States Bank Mergers & Acquisitions (Bank of New York Mellon)

Photo: The Bank of New York Mellon's headquarters at No. 1 Wall Street, Lower Manhattan.

The Bank of New York Mellon Corp.

The Bank of New York Company, Inc.

The Bank of New York was established in 1784 and holds the distinction as the oldest bank in the United States. New York City at the time was the capital of both New York state and the young nation. In 1792, The Bank of New York became the first corporation to be traded on the newly-formed New York Stock Exchange. Its NYSE ticker was simply "BK", a reflection that it was "The Bank" requiring no reference to its name.

In 1804, in what is still considered one of the most bizarre duels in American history, The Bank of New York founder Alexander Hamilton was fatally shot by political rival Aaron Burr, who had been the Vice-President of the United States, and founder of The Bank of The Manhattan Company (which evolved into Chase Manhattan Bank and today’s JPMorgan Chase & Co.) Aaron Burr was indicted for murder but was never tried.

In the 1880s, The Bank of New York was prominent in financing New York's railroad network, as well as New York City's subway system. In 1922, the bank merged with the New York Life Insurance and Trust Company, allowing the bank to expand into the important trust business. Thanks to its conservative lending practice, the bank survived the Great Depression relatively unscathed.

In 1966, the bank's trust business was further strengthened with the acquisition of the Empire Trust Company. In 1969, by establishing a bank holding company, The Bank of New York expanded outside of New York by taking over New Jersey's National Community Banks and Connecticut's Putnam Trust Company. In 1988, the bank bought the Irving Bank Corp. for USD $1.5-billion and became the 10th largest bank in the United States. In 2006, however, the Bank of New York decided to focus on wholesale banking and sold its 338-branch retail banking network to JPMorgan Chase & Co.

The Bank of New York Mellon today specializes in 6 areas: asset management, asset servicing, wealth management, broker-dealer and advisory services, issuance services and treasury services.

Mellon Financial Corp.

T. Mellon & Sons Bank was established by retired judge Thomas Mellon in Pittsburgh in 1869. In 1902, the bank switched to a national charter and changed its name to Mellon National Bank. Like many other American banks, a change in U.S. banking legislation prompted Mellon National Bank to create a holding company in 1972 called Mellon National Corp. Throughout the 1980s and 1990s, Mellon Bank expanded in other parts of Pennsylvania and neighbouring state like Delaware through a series of acquisitions.

Recent transaction(s):

  • In 1993, Mellon Bank Corp. bought The Boston Company for USD $1.45-billion from Shearson Lehman Brothers, a subsidiary of American Express Co. The Boston Company was a leading provider of institutional trust and custody, institutional asset management, private banking services, and mutual fund custody services.
  • Also in 1993, Mellon Bank Corp. acquired America's No. 6 mutual fund company Dreyfus Corp. for USD $1.87-billion. Combining Mellon's asset management business with that of the Dreyfus Corp. raised Mellon to the second largest investment management firm in the U.S.
  • In 1995, Mellon and Chemical Banking Corp. created a joint venture named Mellon Chemical Shareholder Services to provide stock transfer and related shareholder services to publicly-listed companies. Mellon Chemical Shareholder Services was renamed ChaseMellon Shareholder Service following the merger between Chemical Banking Corp. and Chase Manhattan Corp.
  • In 1996, Mellon Bank entered into a similar agreement with the Canadian Imperial Bank of Commerce to form the CIBC Mellon Global Securities Services and CIBC Mellon Trust to focus on the Canadian trust, custody and securities transfer market.
  • In 1998, Mellon and ABN AMRO joined forces to provide global custody services by creating ABN AMRO Mellon Global Securities Services.
  • In 1999, Mellon began its gradual departure from the personal banking business by divesting its mortgage, credit cards and transaction processing businesses. Later in the year, Mellon Bank Corp. changed its name to Mellon Financial Corp. to reflect the new focus on corporate clients rather than retail clients.
  • In 2001, Mellon Financial sold its mid-Atlantic, retail banking network to Citizens Financial Group for USD $2.2-billion. Citizens Financial is a subsidiary of The Royal Bank of Scotland Group plc.
  • In 2006, The Bank of New York swapped its 338-branch retail banking network for JPMorgan Chase & Co.'s corporate trust unit plus USD $150-million in cash. The assets being swapped was valued at about USD $3.0-billion.
  • In late 2006, The Bank of New York announced a friendly USD $16.6-billion offer for Mellon Financial Corp. The new entity would be called The Bank of New York Mellon Corp. The combined bank had over USD $1-trillion in assets under management, as well as over USD $18-trillion in assets under administration and custody.
  • During the second half of 2008, a number of international banks were caught up in the Global Banking Meltdown. As losses from the collateralized debt obligations (CDOs) soared to billions of dollars around the world, the inter-bank credit market froze, drying up funding sources for many banks. Even some of the biggest and most well-known banks in Britain, the U.S., Ireland, Belgium, the Netherlands and Germany were pushed to the brink of bankruptcy. On 2008-09-14, investment bank Lehman Brothers collapsed, sending more shock waves and panic around the global financial markets.
  • Following the lead of Britain’s GBP 37-billion (USD $64-billion) partial nationalization of The Royal Bank of Scotland Group, HBOS and Lloyds TSB Group, the U.S. government unveiled a similar plan on 2008-10-14 under which the U.S. Treasury invested USD $250-billion in nine major U.S. banks. The nine banks that issued new preferred stock in exchange for USD $250-billion in funds were: Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs, Morgan Stanley, Merrill Lynch, Bank of New York Mellon, and State Street. All nine banks’ preferred stock would pay 5% dividends annually in the first five years, and 9% thereafter. The funds were disbursed under the name Troubled Asset Relief Program (TARP). The Bank of New York Mellon received USD $3-billion under TARP.
  • In June 2009, as one of the stronger American banks and least-affected by the financial crisis, the Bank of New York Mellon raised USD $2.9-billion from investors and promptly repaid the U.S. government the USD $3-billion it received under TARP in the autumn of 2008.
  • In August 2009, Bank of New York Mellon bought Insight Investment Management unit from Lloyds Banking Group for GBP 235-million (USD $387-million). The unit managed about GBP 80-billion of assets.
  • In 2010, BNY Mellon bought PNC Global Investment Servicing Inc. from PNC Financial Services for USD $2.31-billion in cash. The unit purchased provided back-office data and accounting processing for financial advisors, fund managers and investment brokers. It had USD $855-billion in assets under administration.
  • In March 2010, BNY Mellon acquired BHF Asset Servicing GmbH from BHF-BANK AG and Sal. Oppenheim jr. & Cie. SCA for Eur 253-million (USD $343-million). The purchase included BHF Asset Servicing's subsidiary Frankfurter Service Kapitalanlage-Gesellschaft mbH (FSKAG). Together BHF Asset Servicing and FSKAG had Eur 348-billion of assets under custody or administration.

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