The Bank of New York Mellon Corporation ( BK ) announced a definitive agreement to acquire Penson Worldwide Inc. 's ( PNSN ) Australian subsidiary, Penson Financial Services Australia Pty Ltd (PFSA). As a part of the agreement, BNY Mellon will pay AUD$33 million ($33 million).
PFSA is a clearing firm that offers execution and clearing services. It also processes local exchange-traded equities and exchange-traded options. In addition to holding an Australian Financial Services License, it is a market participant of the Australian Stock Exchange and a clearing participant of the Australian Clearing House.
The acquisition is expected to close by the end of this year, subject to regulatory approvals. Following the completion, PFSA will be integrated with BNY Mellon's Pershing LLC unit. Pershing offers global execution and clearing services, technology and investment solutions to retail and institutional financial establishments, investment professionals and wealth management community.
After the closure of the transaction, Pershing will become the leader in retail clearing firms, offering its services across U.S., U.K., Ireland and Australia. Though BNY Mellon has its presence in Australia for more than 35 years, this deal provides overseas expansion opportunities and strong impetus for growth in retirement and advisory services.
The deal is basically a part of the restructuring initiative that Penson had announced in August. The main aim of this initiative is to lower expenses and debt, improve profitability, stabilize capital levels and position the company for growth. From this sale, Penson is expected to gain $14 million.
Australia, the world's 14 th largest economy, is strategically important for BNY Mellon. The company expects to continue its local franchise growth. The acquisition of PFSA will add new capabilities and enhance the company's products and services.
Over the next few years, BNY Mellon's non-U.S. revenue is expected to go on increasing as a result of the development of capital markets and modernization of public pension schemes globally. Hence, the present acquisition will enable the company to benefit from increased revenue and cross-selling opportunities.
BNY Mellon currently retains a Zacks #3 Rank, which translates into a short-term 'Hold' rating.
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