Credit Suisse First Boston (CSFB) has confirmed plans to sell its Pershing clearing unit to The Bank of New York for US$2 billion in cash.
The deal, which is expected to close in the first half of this year, also stipulates the repayment of a US$480 million subordinated loan, as well as an additional contingent payment of up to US$50 million based on future performance.
Pershing provides outsourcing and related processing services to 850 clients worldwide and is a major player in the back office processing market both in London and New York. In the US, the company handles about 10% of the trades made on the New York Stock Exchange, second only to Bear Stearns with 12% of Nyse trades.
The sale of the unit fits with Credit Suisse's declared strategy of disposing of non-core assets as it bids to bolster its faltering capital base.
Commenting on the transaction, CSFB’s chief executive officer and co-CEO of Credit Suisse Group, John Mack, says: "Given today’s challenging capital market environment, CSFB is focused on enhancing our leading positions in our primary business areas."
As a result of the transaction, the regulatory capital positions of CSFB and CSG will be enhanced by the elimination of approximately US$500 million in goodwill and an aggregate reduction in risk-weighted assets of approximately US$1.8 billion. The transaction will generate a modest pre-tax loss and an after-tax loss on the sale of approximately US$250 million.
Bank of New York has built its trade processing operation into a substantial business following a series of smaller-scale acquisitions over recent years.