Bank of America acquires Merrill Lynch

by David Masters

Story link: Bank of America acquires Merrill Lynch

Bank of America yesterday reported that it has agreed terms to acquire struggling financial services provider Merrill Lynch in a deal worth $50 billion.

The all-stock transaction will see Bank of America pay a 70% premium on Merrill Lynch’s book value.

The deal sees Bank of America trading 0.8595 shares of its common stock for every Merrill Lynch common share – approximately equivalent to $29 per share. Just one year ago, Merrill Lynch was trading at $90 per share.

Bank of America CEO, Ken Lewis, said the merger represents a ‘great opportunity’ for shareholders, increasing the value of both companies.

The company believes that the acquisition will start enhancing its earnings by 2010, with $7 billion in cost savings to be achieved by 2012.

Lewis added that the merger will allow Bank of America and Merrill to take advantage of business synergies.

Merrill CEO, John Thain, pointed out that there is little overlap between the operations of the two businesses.

However, Lewis refused to speculate on whether lay-offs are likely as a result of the merger.

Three directors from Merrill Lynch will join the board at Bank of America.