BNY Mellon to buy PNC global investment services business for $2.31 billion

BNY Mellon to pay $2.31B in cash for PNC division

CHARLOTTE, N.C. — Bank of New York Mellon Corp. said Tuesday it is acquiring the global investment servicing business of PNC Financial Services Group Inc. for $2.31 billion in cash.

By buying the Wilmington, Del., business, BNY Mellon said it will add $855 billion in assets under administration and become the second-largest provider of fund accounting, administration and transfer agency services.

The business being acquired is known as Global Investment Servicing Inc., and it provides asset mangers and financial advisors with services such as custody, transfers and fund accounting.

“It’s one of those rare situations where it actually was complimentary to three of our business lines,” said Robert P. Kelly, BNY Mellon chairman and chief executive officer, said in an interview with The Associated Press. “Strategically it makes since and financially it’s very attractive.”

BNY Mellon says it will pay $1.57 billion for the business’ stock and intercompany debt. It will raise $800 million in equity as part of the deal. The all-cash acquisition, which will boost BNY Mellon’s profit in the first year, is expected to close in the third quarter, pending approval by regulators.

PNC said it expects to report an after-tax gain of about $500 million and an increase in its Tier 1 capital level, a key measure of financial strength, by $1.6 billion. As a result, PNC’s Tier 1 common capital ratio as of Dec. 31 would be raised by 0.7 percentage points to an estimated 6.7 percent.

“Given the changing competitive landscape in the investment servicing industry, we believe this is the proper time to sell the business to capture the full value of PNC Global Investment Servicing,” James E. Rohr, PNC chairman and chief executive officer of PNC, said in a statement. “The capital generated from this transaction will position PNC with further flexibility.”

PNC was among the better regional bank performers during the financial crisis, buying struggling rival National City Corp. in a 2008 deal that made the Pittsburgh-based bank the nation’s fifth-largest by assets. PNC received government bailout funds to help assist with the National City deal.

The sale of Global Investment Servicing Inc. could help the bank pay back some of the $7.6 billion in bailout funds. PNC’s Rohr has made repayment a goal for 2010.

BNY Mellon’s Kelly said he approached PNC “in a serious manner” regarding a deal several months ago, but the conversation started way before then.

“The first time I ever mentioned it to Jim that we were interested was two or three years ago,” Kelly said. “Now was just the better time.”

PNC Global Investment Servicing serviced total fund assets of $2.3 trillion and has 4,450 full-time employees. Global investment services CEO Stephen Wynne will be retained.

Shares of PNC Financial fell 46 cents to $55.40 in morning trading, while shares of BNY Mellon lost 14 cents to $29.44.