The Bank of New York (BoNY) has entered into a definitive agreement to merge with Pittsburgh-based Mellon Financial in an all stock deal worth around $16.5 billion that will create the world's largest securities servicing and asset management firm. Under the terms of the agreement, BoNY shareholders will receive 0.9434 shares in the new company for each share of BoNY that they own and Mellon shareholders will receive one share in the new company for each Mellon share they own. The parties have entered into mutual stock option agreements for 19.9% of the issuer's outstanding common stock. The new company, which will be called The Bank of New York Mellon Corporation, will have annual revenues of more than $12 billion, with approximately 28% derived from asset servicing, 38% from issuer services, clearing services and treasury services and 29% from asset management and private wealth management. Its nearest scale rivals in the securities servicing arena will be Northern Trust and State Street. Robert Kelly, currently president, chairman and CEO of Mellon, will serve as CEO of the new company while BNY chairman and CEO Thomas Renyi will serve as executive chairman of the merged group for 18 months after closing. Kelly will evetually succeed Renyi as chairman of the board. Gerald Hassell, currently BoNY president, will hold the same position in the new company. The board of directors will comprise 10 members designated by BNY and eight members designated by Mellon. The deal fulfills a long-standing ambition for BNY's Renyi, who saw an earlier unsolicited offer for Mellon rebuffed in 1998. The companies say their combined employee base of 40,000 is expected to be reduced by approximately 3900 over a three-year period following the merger under plans to cut costs of $700 million annually. The transaction involves about $1.3 billion of restructuring charges. The deal is expected to close early in the third quarter of 2007, subject to regulatory and shareholder approvals. Commenting on the merger, Renyi says: "We will be the global leader in securities servicing, and one of the top providers of asset and wealth management worldwide. "Together, we will have the scale, the technology, the capital, and the people we need to compete and win in the rapidly expanding global marketplace."