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Forget about it.

That's what

State Street Boston Corp.

(STT:NYSE) told investors about the chances it would sell out to

Bank of New York Co.

(BK:NYSE). But investors didn't listen. Instead, they bought like a buyout was a certainty, pushing State Street's stock up 13%, or $8, to $71 a share in New York Stock Exchange trading Friday. Bank of New York gained 87.5 cents to $34.125.

But all that investor takeover giddiness might be misplaced. Difficult regulatory hurdles as well as fierce shareholder loyalty to State Street's chairman and chief executive might prevent the nuptials from taking place.

Friday's State Street stock feeding frenzy was driven by Bank of New York's disclosure late Thursday that it had filed with the Federal Reserve and the Massachusetts Board of Bank Incorporation to boost its stake in State Street to 9.9% from 4.99%.

State Street responded by saying that it "reaffirms its commitment to delivering long-term shareholder value under the company's current strategic plan. Our board firmly believes that by remaining independent and pursuing our strategic plan, we will continue to deliver strong performance for our shareholders in the years to come."

In short, get lost Bank of New York.

For its part, Bank of New York did put a friendly face on its filing. The bank holding company said the bigger stake was for "investment purposes." It also called its proposed increased investment "non-controlling." And Bank of New York is known for buying stakes in other banks as investments.

But investors apparently remembered Bank of New York's successful hostile takeover of Irving Trust Co. in 1988, a rarity in banking. In addition, "investors are saying a merger of the two companies would be pretty powerful," says Michael Ancell, an analyst with

Edward Jones

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in St. Louis, which has not done any recent underwriting for either bank. Both companies are strong in securities processing, which means they would create a powerhouse in that arena and probably cut plenty of costs by rooting out duplications in those operations.

Yet the road blocks are too numerous and too tall for success.

Chief among them is State Street's actual unwillingness to sell out. Marshall N. Carter, State Street's chairman and chief executive, is said by analysts to be a strong leader who has no plans to step aside. Add to that State Street's stellar financial performance, which has endeared Carter to shareholders.

State Street's earnings in the nine months ended Sept. 30 climbed 18% to $214.9 million, or $2.63 a share, from $181.6 million, or $2.19 a share, in the year-earlier period.

Bank of New York also said it is entering into "a series of standard commitments in its applications," which, among other things, would restrict it from seeking a board seat at State Street or from trying to influence the Boston company's operations.

John W. Adams, an analyst with

Adams, Harkness & Hill

Inc. in Boston, notes that State Street's business of managing financial assets is relationship driven. Those relationships "don't automatically transfer, so there's no way you can do an unfriendly" takeover, he says. Adams Harkness has not done any recent underwriting for either bank.

Add all this up and a deal looks like a long shot.

"I think a deal is pretty unlikely," says Ronald I. Mandle, an analyst with Sanford C. Bernstein & Co. in New York.

Sanford C. Bernstein

has not handled any recent underwriting for either bank.

By Erle Norton