<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) - April 26, 1998
MELLON BANK CORPORATION
(Exact name of registrant as specified in charter)
Pennsylvania 1-7410 25-1233834
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number Identification No.)
One Mellon Bank Center
500 Grant Street
Pittsburgh, Pennsylvania 15258
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code - (412) 234-5000
<PAGE>
ITEM 5. OTHER EVENTS
By press release dated April 26, 1998, Mellon Bank Corporation
announced that its board of directors unanimously rejected the
unsolicited merger offer from The Bank of New York Company, Inc. That
press release and related materials being presented to the investment
community are filed as exhibits.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit Description
Number
99.1 Mellon Bank Corporation Press Release, dated April 26, 1998, announcing
the matter referenced in Item 5 above.
99.2 Mellon Bank Corporation Response to Bank of New York Proposal.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MELLON BANK CORPORATION
Date: April 27, 1998 By: /s/ STEVEN G. ELLIOTT
Steven G. Elliott
Vice Chairman, Chief Financial Officer
& Treasurer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Description Method of Filing
<C> <S> <C>
99.1 Press Release dated Filed herewith
April 26, 1998
99.2 Mellon Bank Corporation Filed herewith
Response to Bank of New York
Proposal
</TABLE>
<PAGE>
Exhibit 99.1
MEDIA: ANALYSTS:
Sandra J. McLaughlin Donald J. MacLeod
(412) 234-4003 (412) 234-5601
FOR IMMEDIATE RELEASE
MELLON BOARD OF DIRECTORS REJECTS BANK OF NEW YORK OFFER
PITTSBURGH, April 26, 1998--Mellon Bank Corporation (NYSE: MEL) today announced
that its board of directors unanimously rejected the unsolicited merger offer
from the Bank of New York Company, Inc. at a meeting today.
The text of the letter from Mellon responding to Bank of New York Chairman
and Chief Executive Officer Thomas A. Renyi follows:
April 26, 1998
Mr. Thomas A. Renyi
Chairman & Chief Executive Officer
The Bank of New York Company, Inc.
48 Wall Street
New York, New York 10286
Dear Tom:
Our Board of Directors, assisted by its financial and legal advisors and by
management, has carefully reviewed your letter of April 22, 1998. Following a
thorough review at the Board's meeting on April 26, 1998, the Board unanimously
determined that a merger of our two organizations would not be in the best
interests of Mellon or its shareholders, customers, employees, communities and
other constituencies and directed us to send you this letter.
The achievements of Mellon Bank over the past 11 years clearly demonstrate the
commitment and actions of our Board, management and employees to enhance
shareholder value. We continue to invest in the highly successful strategy that
has produced superior returns for our shareholders over that time, including the
rapid growth of several important core businesses. We are very confident about
our future and ability to provide outstanding products for our clients, as well
as superior returns for our shareholders.
--more--
<PAGE>
Mellon Board Rejects Bank of New York Offer
April 26, 1998
Page 2
While BONY certainly has strengths in its primary businesses, some of which are
also very important to Mellon, BONY has neither a significant presence nor a
noteworthy record of success in three other growth areas that are strategically
important to us: asset management/mutual funds, personal trust and consumer
financial services, which together comprise 48 percent of our total revenue.
In December 1997, we terminated merger discussions with BONY because we
concluded that the seemingly attractive combination of our two institutions did
not make sense upon full analysis of your businesses, the two companies' very
different business strategies and the business strategies that were likely to be
implemented by the merged company based on the proposed management structure.
We concluded, among other things, that the application of your cost-savings-
based business strategy would adversely affect many of our key businesses such
as asset management. We believe that nothing has changed since we determined to
terminate discussions with you in December, except that you are now assuming
dramatically higher cost savings to justify a premium, which would only
exacerbate the adverse effects of your strategy on our high-end businesses.
We have carefully analyzed the proposed expense savings itemized in your recent
presentation to analysts and conclude that they would be devastating to the
businesses that are key to Mellon's superior performance, and would interfere
with our respective efforts to meet the formidable challenges of Year 2000
compliance. Further, the expense savings BONY currently proposes are
considerably more than we determined could be achieved in our earlier joint
detailed analysis without severely damaging the revenue and earnings growth
potential, as well as customer satisfaction, for those lines of business.
Importantly, the climate of the merged company would make it difficult to
attract and retain experienced, talented investment management professionals.
We are convinced that the lack of similarities between our two companies, the
tremendous execution risk and our starkly different business philosophies would
negatively affect the price earnings multiple at which the merged company would
trade.
Mellon's Board is committed to the successful business strategy that has
produced the following results:
. In the current decade to March 31, 1998, we achieved a total return
for shareholders of 773 percent, outpacing both the Keefe Bruyette
& Woods 50 average of 385 percent and S&P 500's 243 percent for the
same period.
. For the first quarter, 1998, Mellon's return on common equity was
21.6 percent and return on assets was 1.89 percent--among the top
leaders of our industry. During 1997, the value of Mellon's stock
increased 71 percent.
. Since the beginning of 1998 through April 17, our stock has
appreciated 15 percent, and our price/earnings ratio is equal to
about 93 percent of the P/E ratio of the S&P 500 and is much higher
than the average of 85 percent for large banks.
--more--
<PAGE>
Mellon Board Rejects Bank of New York Offer
April 26, 1998
Page 2
As was clear several months ago after countless hours of discussion and review
with you and your associates--and remains clear--a Mellon/BONY combination does
not make strategic business sense and, in fact, presents substantial execution
risks, certainly for Mellon shareholders. Merging simply for the sake of
achieving greater size is not good business and is certainly not good public
policy.
Your letter states that you are only interested in undertaking this combination
on a consensual basis. Therefore, we assume that our response settles this
matter once and for all. We will now return our energies and resources to doing
what is expected of us, that is, building value for our shareholders and serving
our customers, employees and communities.
Respectfully,
Frank V. Cahouet Martin G. McGuinn
Chairman, President and Chief Executive Officer Chairman and Chief Executive
Mellon Bank Corporation Officer
Mellon Bank, N.A.
Christopher M. Condron Steven G. Elliott
President and Chief Operating Officer Senior Vice Chairman
Mellon Bank, N.A. and Chief Financial Officer
Mellon Bank, N.A.
# # #
<PAGE>
EXHIBIT 99.2
LOGO MELLON BANK CORPORATION
Response to Bank of New York Proposal
April 26, 1998
<PAGE>
LOGO MELLON-------------------------------------------------------------------
Strategy
Maximize returns to investors over the long run
. Sustainable high quality revenue and earnings growth
- focus on higher growth market segments
- effective cross-selling
. High returns on invested capital
- capital allocation to higher return business
- prudently manage capital position
2
<PAGE>
LOGO MELLON-------------------------------------------------------------------
Strategy
. Focus on returns--not absolute balance sheet size
. Why broad based?
- improved earnings quality/reduced volatility
- less dependent on economic/business cycle
- don't "overreach" in any single business
3
<PAGE>
LOGO MELLON-------------------------------------------------------------------
Financial Goals
Full Year 1st Qtr.
1997 1998 Goal
---------- -------- ---------
High-quality, growth oriented earnings
Reported EPS Growth 12% 13% 12-14%
Tangible EPS Growth 11% 14% 12-14%
Focus on high return businesses
Return on Common Equity 21.5% 21.6% 20-22%
Return on Tangible Common Equity 37.5% 43.3% 40-45%
4
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LOGO MELLON-------------------------------------------------------------------
Products
<TABLE>
<CAPTION>
Consumer Business
Rank Rank
------ ------
<S> <C> <C> <C> <C> <C> <C>
Mutual Funds Global # 1 Bank Investment Mgmt. Global Top 5
Fee Personal Trust Nat'l Top 3 Custody Global Top 5
Services Mortgage Servicing Nat'l Top 10 Cash Management Global Top 5
Electronic Brokerage Nat'l Top 10 Benefits Consulting Global Top 10
Rank Rank
------ ------
Jumbo Mortgage Nat'l Top 5 Middle Market Nat'l Top 3
Consumer Loans Reg'l Top 3 Asset Based Lending Nat'l Top 5
Banking Consumer Deposits Reg'l Top 3 Leasing Nat'l Top 5
Small Business Reg'l Top 3 Corporate
Relationships Nat'l Top 10
</TABLE>
5
<PAGE>
LOGO MELLON-------------------------------------------------------------------
Total Return to Shareholders
1,050 [GRAPH]
900 Mellon 32%
750 KBW 50 23%
600 S&P 500 18%
450
300
150
0
1989 1990 1991 1992 1993 1994 1995 1996 1997 4/17
Mellon 100 88 135 212 218 197 362 498 873 1011
KBW 50 100 72 114 145 153 145 233 331 485 573
S&P 500 100 97 126 136 150 152 209 256 343 397
Mellon #2 in the KBW 50 behind USB.
6
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- -----------------------------------------------------------------------------
Bank of New York Proposal
7
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BANK OF NEW YORK PROPOSAL----------------------------------------------------
Proposed Transaction Summary
Consideration: 1.40 BK shares for each MEL share
Fixed exchange ratio, no collars
Approximately $90.00 per MEL share
based on BK closing price on 4/21/98 of
$64.06 ($82.78 per MEL share based on
BK closing price on 4/24/98 of $59.13)
Transaction Value: $24 billion ($22 billion as of 4/24/98)
Pro Forma Market Cap: $50 billion ($46 billion as of 4/24/98)
Structure: Pooling-of-interests (with 19 million
share reissuance)
Tax-free exchange
8
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BANK OF NEW YORK PROPOSAL----------------------------------------------------
Overview
. On the surface, a seemingly attractive combination of:
- two high performing institutions, with
- emphasis on different high growth fee businesses, and
- incremental earnings for the pro forma entity driven primarily by
aggressive expense reduction.
9
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BANK OF NEW YORK PROPOSAL----------------------------------------------------
Overview (cont'd)
. Upon full analysis, however, the two companies have very different business
strategies with respect to:
- investment for growth and productivity
- expense reduction versus top line growth
- balance between consumer and business sectors
- retention of key people in fee businesses
10
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BANK OF NEW YORK PROPOSAL----------------------------------------------------
Overview (cont'd)
. These differences were fully recognized in December 1997, were the reason
discussions were terminated, and have not changed
. BONY has now assumed dramatically higher cost savings than discussed in
December
. Those higher cost savings would likely be devastating to many of our key
businesses and customers
11
<PAGE>
BANK OF NEW YORK PROPOSAL----------------------------------------------------
Investment for Growth and Productivity
. Risk of lack of investment in infrastructure and systems
Capital Expenditures
----------------------------
($ millions) 1997 1996 1995
---- ---- ----
Mellon 111 125 101
BNY 45 47 54
Source: BONY and Mellon statement of cash flows, 1997 Annual Report
12
<PAGE>
BANK OF NEW YORK PROPOSAL----------------------------------------------------
Expense Cuts Put Revenue at Risk
<TABLE>
<CAPTION>
($ millions) BONY Proposed Mellon BONY Proposed Mellon
Expense Overlap % Enhancements Revenue
Area Reduction Expense Cut Revenue Equiv./3/ @Risk/4/
<S> <C> <C> <C> <C> <C>
Securities Servicing/
Processing $ 193 $ 366/1/ 53% $110 - 165 $583
Banking Units $ 202 $ 353 57% $50 - 75 $975
Systems & Technology $ 97 $ 177 55%
Staff & Other $ 208 $ 480 43%
----- ------
Subtotal $ 700 $1,375 51%
Non-Overlap/2/ $1,125 $40 - 60
------ -----------
Total $2,500 $200 - 300
</TABLE>
/1/ Includes custody and cash management for Mellon
/2/ Includes Dreyfus, TBC Jumbo Mortgage, Buck, AFCO, Mortgage Banking, Regional
Banking, Middle Market, Credit Card, Merchant/ATM processing.
/3/ Expressed as revenue equivalent with 33% to 50% margin
/4/ 1st Quarter 1998 annualized
13
<PAGE>
BANK OF NEW YORK PROPOSAL----------------------------------------------------
Efficiency* is a Function of Business Mix
Mellon
Consumer Business
Fee 74% 73% 72%
Services (State Street = 74%)
62%
Banking
55% 36%
49%
*Excludes amortization of intangibles and trust-preferred securities expense
14
<PAGE>
BANK OF NEW YORK PROPOSAL----------------------------------------------------
Overdependence on the Business Sector
Net Income - 1997
Mellon/1/ BONY (Est.)/2/
Consumer Business Consumer Business
Fee 15% 31% 46% Fee 2% 34% 36%
Services Services
Banking 30% 24% 54% Banking 12% 52% 64%
45% 55% 14% 86%
/1/ excludes one-time Cornerstone writedown
/2/ based on BONY sector reporting assuming 50% trust fee income is allocated to
consumer fee services at a 40% pre-tax margin; "other" sector is allocated
to Business Banking.
15
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BANK OF NEW YORK PROPOSAL----------------------------------------------------
Importance of the Consumer
Mellon: A broad based financial services
company with a bank at its core
serving the needs of individuals,
-----------
businesses and institutions
BONY: [Retail] "not core to the bank in five years"/1/
/1/ Tom Renyi @ Boston Harbor Hotel investor breakfast on April 24, 1998
16
<PAGE>
BANK OF NEW YORK PROPOSAL----------------------------------------------------
Specific Risks to Fiduciary Businesses
. Custody conversion (either way) will trigger RFP's
- Mellon benefited significantly from BONY/Bank America
. Mellon's custody mix is different:
Mellon BONY
------ ----
% Master Trust/Custody 75% 17%
17
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BANK OF NEW YORK PROPOSAL----------------------------------------------------
Specific Risks to Fiduciary Businesses (cont'd)
. Consultants may exclude Mellon investment management subsidiaries from new
business opportunities
. Dreyfus/Founders fund boards must approve change of control
. Potential exit of key investment management personnel under BONY culture
18
<PAGE>
BANK OF NEW YORK PROPOSAL----------------------------------------------------
Shareholder Risk in BONY Proposal
. Over-emphasis on expense reduction versus real top line revenue growth
. Dilutes the positive impact of the higher growth, higher ROE consumer/wealth
management sector
. Larger contribution from the low growth, low return, volatile corporate
banking sector
. Year 2000 execution risk in information intensive businesses - all expense
saves implemented by Y/E 1999
19
<PAGE>
BANK OF NEW YORK PROPOSAL----------------------------------------------------
Shareholder Risk in BONY Proposal (cont'd)
. Likely loss of business in custody conversions
. Tainted share reissuance a potential problem
. Retention of key people in fee businesses
20
<PAGE>
BANK OF NEW YORK PROPOSAL----------------------------------------------------
Conclusion
. Risks identified will, in our opinion, produce the following for Mellon
shareholders:
- Lower EPS growth
- Lower P/E
- Lower Shareholder Value
21
<PAGE>
LOGO MELLON------------------------------------------------------------------
Cautionary Statement
A number of statements in the accompanying slides are not based on historical
fact, but are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements,
such as statements of the Corporation's plans, strategies, goals, objectives,
expectations, estimates and intentions, are based on assumptions that involve
risks and uncertainties and that are subject to change based on various
important factors (some of which are beyond the Corporation's control). The
factors that could cause actual results and the Corporation's financial
performance to differ materially from the plans, strategies, goals,
objectives, expectations, estimates and intentions expressed in any forward-
looking statement are set forth in filings made by the Corporation with the
Securities and Exchange Commission.
22
