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Industry Spotlight > Clearing and Custodial Firms

Clearing Consolidation

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The Bank of New York Company, Inc., is acquiring Credit Suisse First Boston’s (CSFB) Pershing unit, making BNY the largest correspondent clearing firm.

Under terms of the agreement, BNY will purchase Pershing for $2 billion in cash, which represents a premium of $1.4 billion over book value. To finance the purchase, BNY will issue $1.1 billion in stock and $900 million in debt. The deal is expected to close by the end of the second quarter.

CSFB was shopping Pershing because it wanted to focus on more core operations like securities lending and underwriting. Merrill Lynch analyst Judah Kraushaar says Pershing is a “sound strategic fit” for BNY, and “propels BNY into a leadership role in clearing and related services.” The deal, he says, also “complements BNY’s focus on diversifying into a full suite of securities services for financial institutions and plays to BNY’s strengths as a consolidator in this arena.”

Merging the two clearing firms should be a snap, Kraushaar says, since BNY “already understands the clearing business, has significant overlap, and has had a good track record in consolidating acquisitions.” Moreover, BNY is acquiring a solid company. “Pershing has been a well-managed company over the years,” Kraushaar notes, “and appears to have impressive technology.”

Washington Bureau Chief Melanie Waddell can be reached at [email protected]