(16 September 2008 – USA) Bank of America has announced that it will acquire troubled US investment bank Merrill Lynch for US$50 billion (A$63 billion).Bank of America Corporation agreed to acquire Merrill Lynch & Co., Inc. in a US$50 billion all-stock transaction that will save the investment bank from the same fate as Lehman Brothers.
Merrill Lynch posted another US$6.6 billion of losses in the first and second quarters of the year and in July announced the sale of US$31 billion of collateralized debt obligations for 22 cents on the dollar, resulting in another US$4.4 billion of writedowns.
By adding Merrill Lynch’s more than 16,000 financial advisers, Bank of America would have the largest brokerage in the world with more than 20,000 advisers and US$2.5 trillion in client assets.
The combined company is set to have leading positions in retail brokerage and wealth management.
Bank of America chairman and chief executive officer Ken Lewis said that acquiring one of the premier wealth management, capital markets, and advisory companies is a great opportunity for shareholders.
Together, our companies are more valuable because of the synergies in our businesses, he added. Bank of America expects to achieve US$7 billion in pre-tax expense savings, fully realised by 2012.
In the last three years, BOA has bought ABN Amro North America for US$21 billion in cash. It also bought US Trust Corporation for US$3.3 billion cash and in January 2006 it bought MBNA Corporation for US$34.6 billion.
The transaction is expected to be completed in the first quarter of 2009, subject to shareholder and regulatory approvals.