Bank Of America Said It Agreed To Buy Merrill Lynch

Bank of America said it agreed to buy Merrill Lynch in a stock deal worth $ 50 billion, snagging the world of the largest retail brokerage after a weekend of the worst ever on Wall Street.

Bofa [BAC 33.74 0.68 (2.06%)] is buying approximately 44 billion dollars in shares of Merrill [MER 17.05 -2.38 (-12.25%)] and $ 6 billion options , Convertibles and stock units.

Bank of America said he expects to reach $ 7 billion euro will not be the savings on the cost of fully realized in 2012, and expects the deal to profit in 2010. The transaction is expected to close in the first quarter of next year.

The price, amounting to about $ 29 per share represents a premium of 70 percent of Merrill recovery rate on Friday, while Merrill shares were trading at $ 50 in May and more than $ 90 in early January 2007. The agreement was approved by the directors of both companies. Merrill three directors will join the Bank of America board.

Merrill plans to establish a single communication to employees somewhere between 8 and 9 pm New York Monday.

Merrill has come under pressure to find a merger partner came after its liquidity began to leak its Friday and the company was concerned about a sharp drop in share price on Monday, according to the people 'within the company.

Merrill expects huge job losses with the merger. The brokerage division remains intact, but there will be large-scale reductions in manpower. CEO John Thain is also expected to leave.

"There is more," said a senior official Merrill.

The deal is that Lehman Brothers Holdings [LEH 3.65 -0.57 (-13.51%)] is preparing for bankruptcy after failing to find a buyer.

A spokesman for Merrill Lynch and Bank of America spokesman could not immediately be reached for comment. (See Charlie's panel of the purchase of Merrill Bofa on the left)

Merrill, wrestling with some of the same toxic debt - largely in connection with the mortgage - which torpedoed Lehman stock was hit hard by the credit crisis and says more than 40 billion dollars in the past year.

Last month, Thain prepared to more than $ 30 billion in debt repackaged in Dallas-based private equity firm Lone Star Funds.

"I'm surprised at the fact that Merrill Lynch would sell at the moment," said Bill Fitzpatrick, an analyst at Optique Capital in Milwaukee. "They seem to take steps to improve their business. They sold much of their Toxic. Merrill seems to be for me to move forward."

Despite these risks, the bank is considered by some as undervalued, partly because of its huge brokerage business, which analysts say is worth more than $ 25 billion.

The brokerage is the largest in the world with assets under management and the number of brokers.

Merrill has about 45 percent Thursday in the profitable asset manager Black Rock, with a value of more than $ 10 billion.

"It can be a powerful fit," said Rick Meckler, chief investment Liberty View Capital Management in New York.

But he added: "Merrill Lynch has made significant progress and the Bank of America shall have sufficient assets to be treated."

Meckler also noted that "due diligence" Bank of America should be on the books of Merrill would be a major undertaking, given the complexity of the exposure of the company in connection with mortgage securities and other complex debt.

With the mediation and share with a value of more than $ 35 billion combined, and Merrill on the market capital of about $ 26 billion, investors assigning a negative value of the investment bank, this implies a huge potential board losses.

On the other hand, it would not be the first time that the Bank of America made a rapid takeover.

In 2005, the Bank bought MBNA credit card company after less than a week of the due diligence, with Lewis saying that the company was comfortable with the takeover, because he knew that people and businesses.

Bank of America in the context of Lewis has in fact become known for large acquisitions and has more than $ 100 billion since 2004 buying other companies.

More recently it acquired troubled mortgage lender Financial Corp., and each country - although many are skeptical about this purchase - veteran analyst Dick Bove said last week, the recovery could prove a master stroke Lewis, as the Government takeover of the mortgage agencies Fannie Mae and Freddie Mac May fuel for other lenders.