SWITZERLAND/US – Having missed out on buying Deutsche Bank’s global custody business, the Bank of New York has found another way to grow its securities services business with the purchase of CSFB’s Pershing correspondent clearing division – though it is having to pay 1.4 billion dollars over book value for the privilege.

The Bank of New York said in a statement that it has “entered into a definitive purchase agreement with Credit Suisse First Boston to acquire its Pershing unit”.

It added that Pershing is the largest global provider of correspondent clearing services and outsourcing solutions. The acquisition would make it the world’s largest correspondent clearing firm.

BoNY will pay a purchase price of two billion dollars in cash which it said represents a premium of 1.4 billion dollars over book value. “The amount may be adjusted higher by up to 50 million dollars based on the level of Pershing's 2003 revenue growth,” it said.

BoNY will fund the purchase from the public issuance of debt and equity, currently estimated to be approximately 900 million dollars and 1.1 billion dollars. The purchase of the New Jersey-based Pershing is expected to close by the end of the second quarter of 2003.

Pershing holds approximately 400 billion dollars of total customer assets, including 160 billion dollars of money market and mutual fund assets. The bank says the buy strengthens its position in Europe. “In addition to its pre-eminent position in the United States, Pershing is one of the most prominent clearing firms in Europe,” it states.

Bank of New York chairman and chief executive Thomas Renyi 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.”

Renyi added: “This strengthens our position as the premier global securities services provider and accelerates the continuing transformation of our business model."

Credit Suisse First Boston chief executive John Mack said: “We believe both companies and our customers, including those of CSFB Private Client Services, will greatly benefit from this transaction."

In October the Bank of New York signed an agreement with Dutch bank ING to offer global custody services to institutional clients in Germany, Benelux and central and eastern Europe.