It is to pay $159 million in cash, including $5 million if Lynch Jones hits a second-quarter revenue target that was not disclosed. The bank will run Lynch Jones as a subsidiary of BNY Brokerage Inc., its agency brokerage arm. The deal, expected to close at the end of June, is subject to regulatory approval.
It was announced in tandem with the Nasdaq Stock Market Inc.'s agreement to buy the majority stake in the Instinet electronic marketplace from Reuters Group PLC for $1.88 billion. That announcement followed the New York Stock Exchange's on Wednesday that it plans to merge with Archipelago LLC, another electronic marketplace.
BoNY already conducts commission recapture, which enables institutional investors such as mutual funds and retirement plan sponsors to reduce the cost of trade commission on their investment portfolio. The bank said it plans to merge its commission-recapture business with Lynch Jones, run the merged operation under that name, and become the leading provider of such services.
Lynch Jones, based in New York, is a top provider, with more than 30 years in trading services for institutional investors. It services 1,400 plan sponsor funds with more than $2.2 trillion in assets.
The deal "gives us the opportunity to expand our business and get more plan sponsors as clients," said Carey S. Pack, president of BNY Brokerage.
Bank of New York may make more deals to enhance its brokerage business, he added. "We are looking to develop our business further, whether that be through alliances or acquisitions. We want to find creative ways to provide more value to our clients."