The acquisition of Pershing, the nation’s second largest trade clearing firm, will make BoNY the country’s largest stock trade clearing firm. Jersey City-based Pershing currently handles 10% of the trades made on the New York Stock Exchange, in addition to handling approximately $400 billion in customer assets, including $160 billion in money market and mutual fund assets.
Also included in the $2 billion deal, a $1.4 billion premium over Pershing’s current book value, is a provision for BoNY to repay a $480 million subordinated loan. Credit Suisse said BoNY’s assumption of the loan would remove about $500 million in goodwill while reducing risk-weighted assets of about $1.8 billion. Additionally, Pershing’s senior management team is expected to continue its tenure overseeing the business, which has more than 850 clients worldwide, according to the report.
BoNY said the transaction expands on its stated strategy of obtaining more revenue from steady businesses, while reducing exposure to corporate credit. In recent years, the bank has been doing just that, building up its processing unit by acquiring more than a dozen such firms.