Bank of America announced Monday a US$47 billion takeover of FleetBoston Financial, extending its banking grip across the US at a stunning price.
It was the richest deal on Wall Street since US pharmaceutical groups Pfizer and Pharmacia's US$60 billion merger in April.
"The dam has been broken," said a report by Merrill Lynch banking analysts Edward Najarian and Beth Messmore.
"This is a truly blockbuster deal," they said.
Under the "definitive agreement," Bank of America will pay the entire price in stock, creating the second-largest US financial and banking group after Citigroup, the world number one.
Existing shareholders in FleetBoston would swap each of their shares for 0.5553 shares in Bank of America. The deal valued each FleetBoston share at US$45, 43 percent above the Oct. 22 closing price.
The total value was about US$47 billion in stock.
"This deal seems to be all about size and scope," the Merrill Lynch analysts said. "Although size and scope are not good justifications for the 43 percent acquisition premium that Bank of America paid for FleetBoston, this deal will probably lead to discussions of how other large banks may need to pursue significant merger and acquisition strategies to keep up with Bank of America."
The deal -- approved by both boards but still requiring clearance from regulators and shareholders -- is expected to close in the second quarter of next year.
Standard and Poor's upgraded Bank of America's outlook to "positive" from "stable" and left its credit ratings unchanged.
About 56 percent of earnings would come from consumer and small business banking, about 25 percent from corporate banking, 11 percent from commercial banking and eight percent from wealth management.
The new Bank of America would have 33 million retail customers, and leading banking shares in the US northeast, southeast, midwest, southwest and west, said Bank of America chairman and chief executive Kenneth Lewis, who is to remain chief executive of the expanded Bank of America.
It would boast 2.5 million business clients in the US and 34 other countries.
The pact ends a nine-month search for a partner by FleetBoston and even longer speculation about the future of the bank since it took heavy losses in South America and closed its US investment bank.
FleetBoston chairman and chief executive Chad Gifford, who is to be chairman of the new Bank of America, had tried in vain to cobble together a deal earlier this year with its Boston-based neighbor John Hancock Financial.
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