Chemical, Mellon to merge their stock transfer units.

Chemical Banking Corp. and Mellon Bank Corp., two of the biggest providers of stock transfer and related services to publicly held companies, said Tuesday they are forming a joint venture.

Industry experts said it was the first time major competitors in that highly concentrated segment of wholesale banking had decided to join forces.

The combined business, to be called Chemical Mellon Shareholder Services, will be the largest provider of those services, with 13 million shareholder accounts and 2,000 corporate clients. It is expected to be operational by January.

8 Dominant Companies

According to the two banks, Chemical currently ranks second in market share; Mellon, fifth. Eight companies control most of the business, running large-scale operations that compete on tight pricing margins.

The Chemical-Mellon venture is significant because the banks will consolidate services while significantly increasing market share, according to Glenn Meiburg, consulting director at the Spectrem Group, a New Jersey-based trust and investment management consulting firm.

The joint venture "should reignite some competitive issues in this business because pricing had settled down recently," Mr. Meiburg said.

On their own, neither New York-based Chemical nor Pittsburgh-based Mellon was earning what it should in this area of business, said Richard Matteis, group executive in Chemical's Geoserve Corporate Trust Services unit.

"For both banks, these services are marginally profitable," he said. "They are not meeting industry standard returns."

Reaching a Profit Standard

Through the partnership, the banks will be able to meet the industry standard pretax profit margin of 20% to 25%, Mr. Matteis said.

Allan Woods, executive vice president and head of Mellon Information Services, the unit that provides stock transfer, added, "Regardless of how efficient you are, at a certain size, the margins are going to be as good as you get."

Mr. Matteis and Mr. Woods refused to comment on who initiated the talks that led to the pact. Nor would they say whether either bank was in joint-venture discussions with other competitors.

Mr. Matteis did say that Chemical, the nation's third-largest bank, and Mellon, the 2nd-largest, had been discussing the partnership for six months.

Parents' Strong Backing

The units are "an excellent fit," Mr. Matteis said, because both companies still believe in the profit potential of stock transfer, despite the shortcomings on the bottom line. "In terms of delivering services, we are both high-tech companies," he said.

Mr. Woods said Mellon brings to the table a superior bookkeeping system, and Mr. Matteis said Chemical's strength is in imaging technology.

Everything about the joint venture is 50-50, from the initial capitalization, a figure neither bank would reveal, to the executives running the operation.

Chemical's head of stock transfer, senior vice president D'Arcy LeClair, will be chairwoman of the joint venture. Mellon's James Aramanda, head of its R-M Trust unit in Canada, will be president and chief executive officer.

Equal Board Representation

Three members from each bank will serve on the new company's board of directors.

The headquarters is expected to be in Mellon's Ridgefield Park, N.J., office, which houses its securities-transfer services unit.

Chemical Mellon Shareholder Services will have other offices in Dallas, Los Angeles, San Francisco, New York, Pittsburgh, and Hartford, Conn. The Big Players In Stock Transfer American Stock Transfer and Trust Co., Brooklyn, N.Y.Bank of New York Chemical Bank, New YorkFirst National Bank of BostonFirst National Bank of ChicagoHarris Trust and SavingsChicago Mellon Bank, PittsburghRegistrar and transfer Co.Cranford, N.J.

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