State Street's Stock Surges on Talk of Merger with Bank of New York
Elstein, Aaron, American Banker
Bank of New York Co.'s plan to increase its investment in State Street Boston Corp. sent the latter's stock price up 13% Friday as analysts contemplated a potential merger of two leaders in the securities processing businesses.
The market looked beyond the official words of Bank of New York that the doubling of its stake, to 9.9%, would be just for investment
As industry experts focused on the compatibility of the companies -- a merger would bolster Bank of New York's No. 1 position in securities processing -- State Street's stock rose $8 a share, to $71, on 6.5 times its average daily trading volume.
Bank of New York closed up 87.5 cents, to $34.125.
Their still highly speculative merger would be a seismic event in the rapidly consolidating securities processing specialty. The companies have a combined 30% to 40% of that market, said Octavio Marenzi, a consultant at the Tower Group in Newton, Mass.
"If either company were to consider who would make a perfect marriage, this is who they would pick," said George Salem, bank analyst at Gerard, Klauer, Mattison & Co., who Friday morning issued a report saying that a merged entity could reduce costs by 40%.
Shortly after Bank of New York's announcement after the stock market closed Thursday, State Street, the third-largest securities processor, issued a statement that it planned to remain independent.
David Berry of Keefe, Bruyette & Woods Inc. said Bank of New York's position in State Street, pending regulatory approvals, would exceed $500 million -- a sum that should not be taken lightly. He viewed the move as more significant than the "stake-out positions" of under 5% that Bank of New York had in some regional bank and, to this point, in State Street. …