A few hours after news broke of Bank of New York Mellon's acquisition of PNC Global Investment Servicing (formerly PFPC), BNY Mellon executives hosted a conference call Tuesday morning to discuss the $2.31 billion acquisition, which works out to about 2.85 times PNC GIS' 2009 revenue of $810 million.

A stock analyst wondered why the price is below the 3 to 4 times revenue range seen in other deals.

"I think we paid a fair price," BNY Mellon chief financial officer Todd Gibbons responded. "If you look at operating margins, they're very low right now so we paid a pretty high multiple relative to current operating margins."

"It's clear to us that this is going to recover back to more traditional operating margins. It's a pretty fair price," he added.

PNC GIS recorded a pre-tax operating margin of 18 percent in the fourth quarter for 2009. Over the 2005 to 2008 time period, the pre-tax margin was about 25 percent.

In his prepared remarks during the conference call, BNY Mellon CEO Bob Kelly called PNC GIS "the last scale franchise in US securities servicing."

"It's very highly complementary to three of our businesses, which is actually pretty rare," Kelly said. Those business lines are asset servicing, alternative investment servicing and Pershing.  

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