Fed Approves BoA's Acquisition of Merrill: Ramifications?

On Wednesday, the Federal Reserve governing board announced its approval of the buyout of Merrill Lynch (MER) by Bank of America (BAC).

The acquisition of New York-based Merrill Lynch, one of the premier wealth management and advisory companies, allows BoA to create a unique financial services firm. Merrill has total consolidated assets of approx. $875 billion and controls deposits of nearly $78 billion, which represent 1.1% of the total amount of deposits of insured depository institutions in the country. Bank of America, with total consolidated assets of $1.8 trillion, remains, on consummation of the proposal, the largest depository organization in the U.S., with total consolidated assets of approx. $2.7 trillion.

BoA agreed to acquire Merrill Lynch on Sept. 15, in a $50 billion or $29/share, all-stock transaction, after the firm’s sharp decline in share price pressured the company to find a merger partner as its liquidity began to dissipate rapidly.

The combining of the two companies creates a firm unrivaled in its breadth of financial services and global reach. By adding Merrill’s more than 16,000 financial advisers, BoA now has the largest brokerage in the world with more than 20,000 advisers.

Charlotte, N.C.-based Bank of America expects to close the transaction by the end of current fiscal year, pending shareholder and additional regulatory approvals.

Disclosure: None

Comments

[jeandit75:]

BAC & MER and their so-called "bright guys" are actually combining forces to better screw up their clients and shareholders. This unprecendeted financial crisis took its origin with some of these "bright guys" inventing collaterized products (like sub-primes) and selling them pretending its rock solid investments. So, beware when management talks about merger synergies. In a period of deleveraging, combining forces will mean more forced selling and eventually more people unemployed. In normal times think about M&A sysnergies as 1+1 = 3. In this case, 1+1 may end-up = much less than 1!

2008 Nov 27 08:07 AM

[cocomurph:]

Your headline is misleading....BAC has not yet acquired MER, since shareholder approvals have not yet been acquired (as you later state in your own article).

2008 Nov 27 09:10 AM

[Mr. Boombox:]

Yeah, these must be the same brilliant "synergies" that the genius Sanford Weill put in place when he merged Citibank with Travelers and Smith Barney, along with getting the Feds to dismantle Glass-Steagal.

How did that work out? Oh yeah, oops! Never Mind!

2008 Nov 27 10:31 AM

[WanderSF:]

It's BofA not BoA.

2008 Nov 27 11:49 AM

[gimmeabreak:]

Those "bright guys (and gals)" you speak of are all on the beach - with millions in off-shore accounts. They are no longer running these companies.

If you want to do something constructive, write your local representatives and demand they insist the DOJ take criminal action against the true culprits and lawbreakers instead of bitching online in a blog about the past.

If you want better customer service from the company that you choose to manage your money/retirement plan, ask for it. Don't sit and bitch about the past and make it sound like the guaranteed future.

The companies that you bash only operate because thousands of people (an overwhelming number are hard-working, honest, and dedicated souls) go to work each day trying to help others get their financial houses in order while try to make a living themselves.

The merger "is what it is" - get over it.

2008 Nov 27 02:24 PM

[DTStreetz:]

+1000 To Gimmeabreak!

I hate these people who generalize "wall street guys" into one group. OK, so those guys screwed up, let's just all give up and not work harder to get better.

What kind of logic does that make? Idiots.

2008 Nov 27 02:51 PM

[cocomurph:]

Thank you for changing the headline to reflect reality.

2008 Nov 28 08:30 AM

[MER Invester:]

If BAC agreed to pay $29/share for MER and the deal is firm, why is MER trading for less than half that. Price should be in the mid 20's

2008 Nov 29 07:21 AM

[mosha tev:]

Bof A's aquisition of Mer is a lot better choice than its merger with Countrywide. I think BofA bought Mer at a bargain price. Although as a stockholder I am feeling stomped on in most of my investments, in the long run, all stock holders of this new company will be greatly enriched. I am in for ther long haul and am purchasing more BofA at a cheap price. When the economy turns around, BofA is positioned to make a killing. Best of luck to all

2008 Nov 29 10:53 AM

[gimmeabreak:]

Recheck your understanding of the deal. It was not hard dollar. It was based on a % of BAC stock per share. I believe that as BAC moves down, so did the "value" of the deal - which is why MER stays pretty close to the BAC movements. There were gaps here and there when speculators were guessing on the likelihood of the merger going through but, outside the arbitrage plays, it has been staying true to the 0.8595 BAC shares for each MER shares.

An explanation is here: seekingalpha.com/artic...


On Nov 29 07:21 AM MER Invester wrote:

> If BAC agreed to pay $29/share for MER and the deal is firm, why
> is MER trading for less than half that. Price should be in the mid
> 20's

2008 Nov 30 04:09 PM

[harvey hooper:]

MER will bring BAC to it's financial and cultural knees. While MER does bring distribution to help BAC to push product, what we remember as the thundering herd, will be replaced with a customer model that BAC embraces. McCann will herd the brokers to Jonestown.

2008 Dec 02 09:15 PM