Thursday, February 23, 2006

Former TD Bank Vice Chair, New CEO of Mellon Financial

  
Barron's, Fei Mei Chan, 23 February 2006

Share of Mellon Financial have been looking ripe of late. And insiders, including the new chief executive, are banking that little will spoil its condition.

Only 17 cents a share off its 52-week high, Mellon stock has gained 29% over the last 12 months, due largely to the success of its asset management and processing businesses. It is currently trading at 36.86.

A week after his first day as Mellon's newly appointed chairman and chief executive officer, Robert P. Kelly bought 70,000 shares in the open market worth $2.5 million, according to filings with the Securities and Exchange Commission.

"You would expect a CEO coming in to buy, but this is a $2.5 million buy for a guy whose base salary is under a million per year," says Ben Silverman, a research director at InsiderScore.com.

A filing with the SEC also reveals that Kelly already held 30,000 shares of Mellon as of Feb. 13, his first day as chief executive of Mellon. Ken Herz, director of corporate communications at Mellon Financial, says Kelly made the open-market purchase following Mellon's announcement on Jan. 31 that he would become CEO.

In his new job, Kelly is obligated to hold shares equal to 25 times his base salary in company stock within five years of his employment. At Kelly's current base salary of $975,000, this ultimately translates to $24.4 million worth in holdings (this would include any vested stock grants he received as part of his compensation package, which total 328,000 shares).

Jonathan Moreland, director of research at InsiderInsights.com, notes that Kelly was a smart trader at Wachovia, where he was chief financial officer.

SEC filings reveal that two board members also exercised options in February and kept their shares.

Director Robert Mehrabian exercised 8,100 and 8,912 shares on Feb. 3 at $13.56 and $19.31, respectively. Seward Prosser Mellon, a direct descendant of founder Thomas Mellon, and a board member since 1972, exercised 8,100 shares at $13.56. Their shares were scheduled to expire between April 2006 and 2007.

"This is quite a reversal of sentiment from [the directors]," says Moreland.

Mehrabian, who has sat on Mellon's board since 1994, was a smart seller in 2000, according to Moreland. And Seward Mellon was a seller in 2005 at lower prices.

Like many other companies, Mellon has been experiencing the wrath of institutional investors seeking to break up the company in the hopes of unlocking value (see Barron's, "Squeezing Mellon," Nov. 28, 2005 and "A Mellon-choly Outcome," Feb. 6, 2006).
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