“Acquiring one of the premier wealth management, capital markets and advisory companies is a great opportunity for our shareholders,” Bank of America chairman and chief executive officer Ken Lewis said.
“Together, our companies are more valuable because of the synergies in our businesses.”
John Thain, chairman and CEO of Merrill Lynch, said he looked forward to working with Bank of America to create “what will be the leading financial institution in the world.”
Merrill, stuck with some of the same toxic debt — much of it mortgage-related — which torpedoed Lehman’s balance sheet, has been hit hard by the credit crisis and has written down more than $US40 billion ($48.6 billion) over the last year.
Last month, Merrill chief executive John Thain arranged to sell over $US30 billion in repackaged debt securities to Dallas-based private equity firm Lone Star Funds.
“I’m surprised that Merrill Lynch would want to sell at this point,” said Bill Fitzpatrick, an analyst at Optique Capital.
“They seem to be taking steps to improve their business. They have sold off a lot of their toxic assets. Merrill seems to be progressing to me.”
In spite of these exposures, the bank is seen by some as undervalued, in part because of its massive brokerage business, which analysts have said is worth more than $US25 billion. The brokerage is the largest in the world by assets under management and number of brokers.
Merrill also has about a 45 per cent stake in the profitable asset manager BlackRock, worth more than $US10 billion.
“It could be a powerful fit,” said Rick Meckler, chief investment officer at LibertyView Capital Management in New York. But he added: “Merrill Lynch has significant exposures and Bank of America would need enough balance sheet to handle that.”
