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Bank of America agrees to buy Merrill Lynch
Published on Mon, Sep 15, 2008 at 11:19, Updated on Mon, Sep 15, 2008 at 17:48 in Business section
Tags: Merill Lynch, Bank Of America , New York
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New York: Bank of America Corp said early Monday it would acquire Merrill Lynch & Co., Inc. in an all-stock transaction worth about $50 billion that should lift the uncertainty shrouding Merrill since the start of the credit crisis over a year ago.
Charlotte, North Carolina-based Bank of America has the most deposits of any US bank, while Merrill Lynch is the world's largest and most widely recognised brokerage.
A combination of the two will create a global financial services giant involved in everything from fixed-income trading to stock underwriting to credit card lending, which will rival Citigroup Inc., the biggest US bank in terms of assets.
"Acquiring one of the premier wealth management, capital markets, and advisory companies is a great opportunity for our shareholders," Bank of America Chairman and Chief Executive Officer Ken Lewis said in a press release.
"Together, our companies are more valuable because of the synergies in our businesses."
Under terms of the transaction, Bank of America would exchange 0.8595 shares of Bank of America common stock for each Merrill Lynch common share, the release said. The price is 1.8 times stated tangible book value, it said.
The transaction is expected to close in the first quarter of 2009, the statement said.
It has been approved by directors of both companies and is subject to shareholder votes at both companies and standard regulatory approvals.
Under the agreement, three directors of Merrill Lynch will join the Bank of America Board of Directors.
"Merrill Lynch is a great global franchise and I look forward to working with Ken Lewis and our senior management teams to create what will be the leading financial institution in the world with the combination of these two firms," said John Thain, chairman and CEO of Merrill Lynch, in the release.
Strategically, most industry analysts are saying it's a good fit. If the deal goes according to plan, Bank of America will be able to offer Merrill's retail brokerage services to its huge customer base.
There is not a great deal of overlap between the two companies - Bank of America does have an investment bank already, but it has never been terribly strong.
Where there is duplication, however, the combination of the two companies could result in more layoffs. Both Merrill and Bank of America have already cut thousands of investment banking jobs over the past year.
And the deal does not come without risks to Bank of America.
Merrill Lynch, like many of its Wall Street peers, has been struggling with tight credit markets and billions of dollars in assets tied to mortgages that have plunged in value. Merrill has reported four straight quarterly losses, and its stock has been sliding.
Officials from the government and various banks met this weekend to discuss what to do about the troubled investment bank Lehman Brothers Holdings Inc. When Bank of America balked at buying Lehman, the government urged it to buy Merrill instead.
The deal differs from JPMorgan Chase & Co.'s buyout in March of Bear Stearns Cos. in that Bear Stearns was sold at a steep discount and with financial backing from the Fed. While Merrill Lynch is burdened with soured real estate investments, its financial position is stronger than Bear Stearns' was.
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Bank of America agrees to buy Merrill Lynch...What's coming next!!
At this juncture world of finance and banking
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