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.”