Executive Business Briefing

Jan. 8, 2003 at 8:48 AM
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NEW YORK, Jan. 8 (UPI) -- Here is a look at Wednesday's top business stories:

Bank of New York buys Pershing for $2 billion

NEW YORK, Jan. 8 (UPI) -- The Bank of New York Co. Inc., the nation's oldest bank and founded in 1784 by Alexander Hamilton, said Wednesday it has entered into a definitive agreement with Credit Suisse First Boston to acquire its Pershing unit in a deal valued at $2 billion.

Pershing is the largest global provider of correspondent clearing services and outsourcing solutions for brokers, asset managers and other financial intermediaries.

Under the terms of the deal, Bank of New York will pay $2 billion in cash, representing a premium of $1.4 billion over book value of Pershing. The lender said the amount may be adjusted higher by up to $50 million based on the level of Pershing's 2003 revenue growth.

The deal will be financed from the public issuance of debt and equity, estimated to be approximately $900 million and $1.1 billion, respectively.

The transaction is expected to close by the end of the second quarter of 2003.

Excluding one-time charges of 6 cents a share, the Bank of New York said the deal is expected to be dilutive to earnings by 2 to 3 cents a share in 2003.

In 2004, the first full calendar year after the deal closes, the transaction is expected to be accretive to the lender's earnings by 2 to 3 cents a share, including $115 million of projected pre-tax cost savings and incremental revenue related opportunities.

The deal has been approved by each company's board of directors but is subject to customary regulatory approvals.

Pershing is a correspondent clearing firm, providing financial services outsourcing solutions, investment-related products and services, and financial product distribution. With headquarters in Jersey City, N.J., the company has approximately 4,000 employees worldwide at 13 locations in the United States, Europe and Asia.

Pershing has a client base of more than 850 broker-dealers and investment managers and supports approximately 100,000 investment professionals at these firms. This client base represents more than 5 million customer accounts. Pershing also holds approximately $400 billion of total customer assets, including $160 billion of money market and mutual fund assets.

Thomas A. Renyi, chairman and chief executive officer of the Bank of New York, said, "Strategically, Pershing is an exceptional fit for the Bank of New York's global franchise.

"Not only does it augment our fastest growing business segment, but it also builds upon our three core strengths -- innovative product capabilities, a well-diversified global client base, and extensive product distribution network. This strengthens our position as the premier global securities services provider and accelerates the continuing transformation of our business model," Renyi said.

John Mack, Credit Suisse First Boston's CEO and co-CEO of Credit Suisse Group, said: "We are pleased to have reached this agreement with the Bank of New York. Pershing is a strong company with a solid reputation in the correspondent clearing marketplace, and the Bank of New York has a global leadership position in securities servicing. We believe both companies and our customers, including those of CSFB Private Client Services, will greatly benefit from this transaction."

United Community Banks buys First Central Banchares

BLAIRSVILLE, Ga., Jan. 8 (UPI) -- United Community Banks Inc. said it has reached a definitive agreement to acquire First Central Banchares Inc., a community bank holding company located in eastern Tennessee, in a deal valued at $30 million.

First Central, with assets of $150 million, is based in Lenoir City and operates eight full-service banking offices that is expected to enhance United's franchise through expansion into high-growth eastern Tennessee markets.

The deal, which has been approved by the directors of both companies, is expected to close by the end of March 2003.

Under terms of the deal, based on United's common stock price of $25.50 a share, First Central's shareholders will receive 821,600 common shares of United and approximately $9 million in cash.

"We believe our partnership with First Central will create value for our shareholders and further enhances the franchise value of our organization," said Jimmy Tallent, United Community Banks' president and chief executive officer.

"We have watched and admired First Central for the past several years. It is financially strong, with excellent management and dedicated employees, and it has experienced a strong growth in customers and business within an attractive area of eastern Tennessee bordering our own markets," he added.

The deal is subject to regulatory approval, as well as other customary conditions of closing.

Stocks decline in Tokyo

TOKYO, Jan. 8 (UPI) -- Stock prices on the Tokyo Stock Exchange ended lower Wednesday in light trading, pressured by weakness in the banking sector.

The blue-chip Nikkei Stock Average, which slipped 56.83 points Tuesday, lost another 138.70 points, or 1.6 percent, to 8,517.80. The broader Topix Index, which lost 6.14 points during the previous session, fell 14.38 points, or 1.7 percent, to 839.55.

Declines outgunned advances, 1,128 to 248, while 116 issues settled unchanged. Volume declined to an estimated 543.84 million shares from 676.58 million shares changing hands during the previous session.

Analysts said stocks ended lower as concern over corporate unwinding of cross-shareholdings added to the market gloom following a weak showing Tuesday on Wall Street.

After opening slightly lower, the Nikkei 225 extended its fall due in part to renewed selling of bank stocks. Lingering worries over the geopolitical situation briefly pushed the Nikkei 225 below the 8,500 level for the first time since late December.

In trading, Mizuho Holdings lost 4.8 percent, Mitsubishi Tokyo Financial fell 1.6 percent, Sumitomo Mitsui Financial sank 5.3 percent and UFJ Holdings fell 5.2 percent.

Konica lost 1.9 percent and Minolta fell 4.5 percent after the two disclosed details of their merger plan. The merged entity will still rank well behind rivals including Canon, Fuji Photo Film and Ricoh in terms of total sales.

Among some of the other active issues, Nintendo dropped 5.1 percent, Toyota fell 2.2 percent, Nissan slipped 0.9 percent, Honda eased 0.7 percent, Mazda lost 3.6 percent and Mitsubishi Motors rose 1.1 percent.

Semiconductor and personal computer manufacturers ended mostly lower on profit-taking following their recent gains. Hitachi fell 3.1 percent, Toshiba lost 2.1 percent, Mitsubishi Electric lost 2.1 percent and NEC lost 2.3 percent.

Prices on the Hong Kong Stock Exchange ended slightly higher. The blue-chip Hang Seng Index, which eased 13.56 points during the previous session, rose 35.81 points, or 0.37 percent, to 9,688.21.

Analysts said stocks ended off their best levels as new policy initiatives to reduce the territory's budget deficit laid out by Chief Executive Tung Chee-hwa failed to inspire investors, who were hoping for economic stimulus measures.

Experts said there was disappointment that Tung did not produce measures to stimulate the economy in his annual policy address. He focused instead on tackling the ballooning budget deficit, pledging to take a 10-percent pay cut and look at new taxes as expected.

Among some of the active issues, property developer Henderson Land Development rose 2.2 percent, MTR Corp., which operates Hong Kong's subway but which also has substantial property developments, rose 2.4 percent and developer Sino Land rose 2 percent.

Hong Kong's main carrier Cathay Pacific Airways rose 1.4 percent, China's biggest carrier China Southern Airlines rose 4.4 percent and China Eastern Airlines gained 3.9 percent.

Stocks ended little changed on the South Korean Stock Exchange. The Korea Composite Stock Price Index, or Kospi, which lost 14.51 points during the previous session, slipped 0.48 points to 651.72.

Analysts said the market found some support on hopes for a peaceful resolution over North Korea's nuclear threat after the United States said it was willing to talk to North Korea on how it meets its obligations to the international community on its nuclear program.

In trading, Kookmin Bank dropped 2.6 percent, Korean Air rose 2.4 percent and SK Telecom added 0.4 percent.

Prices ended higher on the Taiwan Stock Exchange. The key Weighted Index, which rose 11.22 points during the previous session, jumped 135.85 points, or 2.9 percent, to 4,836.93 -- its highest close since late August.

China Steel jumped 6.7 percent, Taiwan Cement rallied 6.8 percent and Far Eastern Textile jumped the daily 7 percent trading limit.

Singapore stocks ended higher. The key Straits Times Index, which fell 12.88 points during the previous session, rose 13.58 points, or 1 percent, to 1,332.32.

Elsewhere around the Pacific region, prices ended little changed in lackluster trading on the Australian Stock Exchange. The blue-chip All Ordinaries Index, which dipped 1.60 points during the previous session, slipped 0.80 point to 3,042.40.

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