Bank of New York Co. is likely to drop its unsolicited bid for Mellon Bank Corp. within the next few weeks, said research director David S. Berry of Keefe, Bruyette & Woods Inc. in a Thursday report.
Mr. Berry, who met with Bank of New York chief executive Thomas A. Renyi on Wednesday with a handful of Keefe clients, said Mr. Renyi indicated that the stalemate between the two companies "must be resolved one way or another within a few weeks, since the current state of affairs is not good for either company."
Mr. Berry said he inferred from Mr. Renyi's comments that "Bank of New York will not doggedly pursue this for months on end."
There have been cases where "deals look good on paper and the execution turns out terrible," said Mr. Berry, referring to Wells Fargo & Co.'s hostile takeover and subsequent rocky integration of First Interstate Bancorp.
In the case of Bank of New York and Mellon, "the odds are poor, particularly given Pennsylvania corporate law," he said. "This is not Bank of New York/Irving all over again," he said, referring to that successful but unwelcome takeover in 1988.
Mr. Berry said Mr. Renyi reiterated his decision not to pursue a hostile deal with Mellon, but has been actively courting some of Mellon's institutional investors.
"But we think it is unlikely thatthey will exert enough pressure to make the difference, given Mellon's strong track record of building shareholder value," Mr. Berry said.
Others appear to believe that a pairing of the two companies is becoming more unlikely.
In Thursday trading Bank of New York's shares surged almost 5% in a galloping market that was lifted by favorable economic data.
Bank of New York's shares rose $1.8125, to $59.0625. However, Mellon's shares fell 87.5 cents, to $72, on a day when bank stocks were up sharply. Arbitragers pointed out that the spread between the two companies is widening, meaning that more investors doubt a deal is in the offing.
However, activist shareholder Guy Wyser-Pratte, whose company owns 100,000 shares of Mellon, said Mellon investors were pressing Mr. Renyi on Wednesday to take a more aggressive stance regarding the stalemate.
In a meeting with Mr. Renyi that also took place on Wednesday, Mr. Wyser-Pratte said, Mellon shareholders present "were much in favor of a transaction."
Mr. Wyser-Pratte added that a proxy fight could be in store as more "investors become enthusiastic" about the combination. "Those that stand in the road too long get run over," he said.
When the idea of a proxy fight was proposed to Mr. Renyi, "I got the feeling that the bank would not help to initiate it but would not do anything to stop it," the activist shareholder said.
Mr. Wyser-Pratte had said Tuesday that a poll should be taken to find out how Mellon shareholders felt about a possible merger. Afterward, he said, Mr. Renyi invited him and several large shareholders to talk.