Robert Kelly's decision to merge with The Bank of New York and move Mellon Financial's headquarters to Manhattan was unpopular even inside his new Sewickley home, where his wife, Rose, had moved only a week and a half ago from Charlotte, N.C.

"It wasn't ideal, let's say that," said Mellon's chief executive officer, who will become CEO of the combined company next year and will have to move to New York.

In the end, though, there was no way to keep Mellon's headquarters, or the home of its CEO, in Pittsburgh if this $16.5 billion merger had a chance of happening.

While the Canada-born Mr. Kelly contends he fought to maintain Mellon in the city where it was founded 137 years ago, Bank of New York executives made it clear during the two-month-long talks that they wanted to keep the home office on Wall Street, where it has been since 1784.

That it also is home to many of the corporate and investment clients Bank of New York and Mellon serve made Manhattan a more natural choice, too.

It helped that when it came time to settle the headquarters issue, Mellon already had a victory: Both sides had agreed that Mr. Kelly would be the CEO of the combined company, replacing Bank of New York CEO Thomas Renyi.

Mellon's 14-person board, a Pittsburgh-dominated group that includes University of Pittsburgh Chancellor Mark Nordenberg, Carnegie Mellon University President Jared Cohon, U.S. Steel CEO John Surma, Giant Eagle CEO David Shapira, Manchester Bidwell CEO William Strickland, J.J. Gumberg CEO Ira Gumberg and Richard King Mellon Foundation President Seward Prosser Mellon, had a "very emotional decision" to make, Mr. Kelly said in an interview last week.

But no director called it a deal-breaker, according to Mr. Kelly. "I didn't hear it in that way," he said. "I heard honest concern about the potential for, if that happened, 'What would this mean for the company?' and 'What would this mean for Pittsburgh? ' "

Attempts to reach Mellon's outside directors were unsuccessful; most referred inquiries to Mellon's public relations department. Mr. Kelly said directors also asked the question: "How can we make [the merger] in the best interest of Pittsburgh?"

Solving that question and satisfying everyone was a "gradual evolution," Mr. Kelly said, helped along by the willingness of Bank of New York executives to consider Pittsburgh as a major employment center for the new company and as a place where as many as 2,000 jobs could be added in coming years after initial layoffs of about 600.

He recalls, in particular, the excitement when Mellon Executive Vice President Michael Bryson and Mellon Senior Vice Chairman Steven Elliott returned from a weekend of talks in New York with the news that Bank of New York's management team viewed Pittsburgh as a low-cost, low-turnover city where rents were lower and where there was "less chance for anything going wrong."

"I didn't have to ask" Bank of New York to commit to Pittsburgh, he said. "Our impression was the entire management team approved Pittsburgh as a creation center for new jobs."

Still, Mellon executives knew the news might not play well in Pittsburgh, the site of many prominent corporate headquarters losses in recent decades. Aluminum giant Alcoa officially planted its headquarters in New York this year after 118 years in Pittsburgh, the news tucked inside a document filed with the U.S. Securities and Exchange Commission.

Was Mr. Kelly worried about how Pittsburghers would react?

"Yes, absolutely," he said Thursday, before leaving Pittsburgh for San Francisco and the Pennsylvania Society dinner this weekend in New York. "I wanted it desperately to be viewed as a good overall transaction for the city and I absolutely believe that it is."

Increase in giving

He followed the advice of former Mellon CEO Frank Cahouet, who rejected a Bank of New York takeover attempt in 1998, and created a Pittsburgh-based advisory board as part of the new company's governance structure. He also agreed to increase charitable giving with a new $80 million Mellon Financial Foundation.

Mellon's public relations department went a step further, drafting a news release specifically for Pittsburgh and making sure the first news conference on the day of the merger was held in Pittsburgh, on the third floor of One Mellon Center, to drive home the company's commitment.

For Mr. Kelly, there is a parallel here to another blockbuster merger he handled in 2001, the $13.4 billion sale of Winston-Salem, N.C.-based Wachovia to Charlotte-based First Union. The name of the new company remained Wachovia but Charlotte kept the headquarters.

The decision shocked Winston-Salem, a city 80 miles north of Charlotte that had lost six New York Stock Exchange-listed companies since the late 1970s, including underwear maker Hanes and Piedmont Airlines. Wachovia, founded there in 1879, was known around town as "The Bank."

Mr. Kelly, as First Union's chief financial officer, led the buyout and became CFO at the new Charlotte-based Wachovia. As part of the merger, Wachovia announced plans for 1,000 to 1,300 job cuts in Winston-Salem but, at the same time, pledged to keep its fast-growing wealth management unit there, as well as its Carolinas banking operations. It also created a committee of executives who have to sign off on decisions affecting Winston-Salem.

Current Wachovia Chief Financial Officer Tom Wurtz, who worked for Mr. Kelly, said his old boss has a "firm sense of responsibility to be transparent." He added: "I think people can be pretty confident, if he has made commitments to the city, he would work his hardest to honor them."

Attractive proposal

When Mr. Kelly came to Pittsburgh, he said of Pittsburgh: "I see it continuing to be the head office."

But in early fall, the phone call came from Mr. Renyi, Bank of New York's CEO, who had seen news reports indicating that Mellon was pursuing Boston asset manager MFS Investment Management, a deal that never happened. Mr. Renyi wanted to know if Mr. Kelly was interested in a merger with Bank of New York.

Once Mr. Kelly took the proposal back to Pittsburgh, he and his executive team were intrigued. Here was an opportunity to create a titan in the financial services industry that would make Mellon stronger as the world's financial services industry continues to consolidate. Here was an opportunity to pair Mellon's strength in asset management with Bank of New York's strength in the processing of securities.

What's more, there did not appear to be any cultural differences to trip up such a union, nor did Mr. Kelly see evidence of residual tension among Mellon management or directors as a result of Bank of New York's nasty takeover attempt in 1998. Mr. Renyi, the man who made that takeover attempt, met twice with Mellon's board in Pittsburgh.

As the talks became more frequent, and as investment bankers gave the proposed merger a nickname (Project Cider, a combination of New York's status as the Big Apple and the word "water-Mellon"), the relationship between the two companies, both of which had shed their retail operations since 1998 and focused more exclusively on a less-glamorous array of financial services, "began to make more sense in greater clarity," Mr. Kelly said.

After the CEO and the headquarters, one of last issues to be decided was the name. It was a tricky discussion. Both companies, Mr. Kelly said, "have enormous pride and culture." It was "enormously important to both of us." There were several possibilities thrown around before the two sides settled on The Bank of New York Mellon Corp. Mr. Kelly was not willing to say what other names were considered.

The moment the negotiations ended was around noon Dec. 2. Mr. Kelly was in his car in the garage of One Mellon Center, on his cell phone with Mr. Renyi and Bank of New York President Gerald Hassell. He knew everything was over when he heard himself saying: "I don't have any other points I can think of."

Then, Mellon's board signed off on the merger last Sunday night from the 48th floor of One Mellon.

It was done. Mellon, a name synonymous with Pittsburgh, would now be based somewhere else.

Yet "our directors," Mr. Kelly said, "never doubted Pittsburgh could do well from this merger."