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The Bank of New York Mellon Corporation (BK - Analyst Report) has recently purchased the remaining 50% stake of its WestLB Mellon Asset Management Joint venture. Back in 2006, BNY Mellon had formed this joint venture (JV) with Portigon – a Germany-based portfolio management and service company. Either of the parties have not disclosed the terms of the deal.
WestLB Mellon Asset Management was created as a 50:50 JV between BNY Mellon and Portigon. The JV has a headcount of about 170 and more than €25bn in assets under management. Upon the acquisition of this JV, Werner Taiber – member of the Managing Board of Portigon – will become the new CEO. This appointment is subject to approval by the German regulators.
Similarly, Morgan Stanley (MS - Analyst Report) is all set to acquire majority stake in a brokerage JV that it had formed with Citigroup Inc. (C - Analyst Report). Morgan Stanley (currently holding 51%) will buy nearly 14% stake in Morgan Stanley Smith Barney for $1.89 billion by the end of the third quarter of 2012. Further, Morgan Stanley would acquire the remaining 35% stake of Citi in the brokerage JV before June 1, 2015 in a phased manner with the next 15% to be acquired by June 1, 2013.
We expect this stake buyout to benefit BNY Mellon’s Investment Management segment. Though the segment’s revenue fell marginally in the first half of 2012 compared with prior-year period, we believe that the company will be able to enhance its top line in the future given a solid portfolio, which displays brilliant German investment techniques.
BNY Mellon currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we also maintain a long-term Neutral recommendation on the stock.
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