Bank of America Corp said early yesterday that it would acquire Merrill Lynch in an all-stock transaction worth about US$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 & Co, Inc is the world’s largest and most widely recognized 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,” he said.
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 statement said.
The deal values Merrill at US$29 a share. That represents a 70 percent premium over the brokerage’s Friday closing price of US$17.05, but well below what Merrill was worth at its peak in early last year, when its shares traded above US$98.
Merrill’s stock dropped further last week as ailing Lehman Brothers raced to find to a buyer.
Bank of America said its buyout is expected to close in the first quarter of next year. The deal has been approved by directors of both companies and is subject to shareholder votes at both companies and standard regulatory approvals, the bank said.
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 press 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 Lehman Brothers. When Bank of America balked at buying Lehman, the government urged it to buy Merrill instead.
The Merrill 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.
ROLLER-COASTER RIDE: More than five earthquakes ranging from magnitude 4.4 to 5.5 on the Richter scale shook eastern Taiwan in rapid succession yesterday afternoon Back-to-back weather fronts are forecast to hit Taiwan this week, resulting in rain across the nation in the coming days, the Central Weather Administration said yesterday, as it also warned residents in mountainous regions to be wary of landslides and rockfalls. As the first front approached, sporadic rainfall began in central and northern parts of Taiwan yesterday, the agency said, adding that rain is forecast to intensify in those regions today, while brief showers would also affect other parts of the nation. A second weather system is forecast to arrive on Thursday, bringing additional rain to the whole nation until Sunday, it
CONDITIONAL: The PRC imposes secret requirements that the funding it provides cannot be spent in states with diplomatic relations with Taiwan, Emma Reilly said China has been bribing UN officials to obtain “special benefits” and to block funding from countries that have diplomatic ties with Taiwan, a former UN employee told the British House of Commons on Tuesday. At a House of Commons Foreign Affairs Committee hearing into “international relations within the multilateral system,” former Office of the UN High Commissioner for Human Rights (OHCHR) employee Emma Reilly said in a written statement that “Beijing paid bribes to the two successive Presidents of the [UN] General Assembly” during the two-year negotiation of the Sustainable Development Goals. Another way China exercises influence within the UN Secretariat is
LANDSLIDES POSSIBLE: The agency advised the public to avoid visiting mountainous regions due to more expected aftershocks and rainfall from a series of weather fronts A series of earthquakes over the past few days were likely aftershocks of the April 3 earthquake in Hualien County, with further aftershocks to be expected for up to a year, the Central Weather Administration (CWA) said yesterday. Based on the nation’s experience after the quake on Sept. 21, 1999, more aftershocks are possible over the next six months to a year, the agency said. A total of 103 earthquakes of magnitude 4 on the local magnitude scale or higher hit Hualien County from 5:08pm on Monday to 10:27am yesterday, with 27 of them exceeding magnitude 5. They included two, of magnitude
Taiwan’s first drag queen to compete on the internationally acclaimed RuPaul’s Drag Race, Nymphia Wind (妮妃雅), was on Friday crowned the “Next Drag Superstar.” Dressed in a sparkling banana dress, Nymphia Wind swept onto the stage for the final, and stole the show. “Taiwan this is for you,” she said right after show host RuPaul announced her as the winner. “To those who feel like they don’t belong, just remember to live fearlessly and to live their truth,” she said on stage. One of the frontrunners for the past 15 episodes, the 28-year-old breezed through to the final after weeks of showcasing her unique