Charlie Gasparino just reported on CNBC that the BofA deal to buy Merrill is done and will be formally announced tomorrow morning. He also added that according to his source at Merrill, there was a “liquidity crisis” at the bank. The WSJ just updated their report below.
The deal, which was being worked out in 48 hours of frenetic negotiating, could instantly reshape the U.S. banking landscape, making the nation’s prime behemoth even bigger. The boards of the two companies approved the deal Sunday evening, according to people familiar with the matter.
Driven by Chief Executive Kenneth Lewis, Bank of America has already made dozens of acquisitions large and small, including the purchase of ailing mortgage lender Countrywide Financial Corp. earlier this year. In adding Merrill Lynch, it would control the nation’s largest force of stock brokers as well as a well-regarded investment bank.
A combination would create a bank of vast reach, involved in nearly every nook and cranny of the financial system, from credit cards and auto loans to bond and stock underwriting, merger advice and wealth management.
It would also show how the credit crisis has created opportunities for financially sound buyers. At $44 billion, or roughly $29 a share, Merrill would be sold at about two-thirds of its value of one year ago, and half its all-time peak value of early 2007. Merrill shares changed hands at $17.05 each on Friday, after falling sharply in the wake of Lehman’s looming demise.
“Why would Bank of America do this?” said analyst Nancy Bush at NAB Research LLC in Annandale, N.J. “Ken Lewis always likes to buy the biggest thing he can. So why not this? You are master of the universe, basically.”
UPDATE: Gasparino insists that the Fed pushed Merrill to sell themselves to another bank. They originally spoke to Morgan Stanley, but Morgan backed off because they couldn’t examine Merrill’s balance sheet.
Maria Bartiromo added during CNBC’s special report tonight that Merrill’s board voted unanimously to do this deal. They looked at what was happening with Lehman and were very skittish about the AIG developments. The deal is expected to close by January and according to John Thain, given the current landscape this is the best situation for Merrill’s shareholders.
It’s still unknown what Thain’s role at Merrill/BofA will be and what will happen to the “Merrill” name. Early reports from CNBC say that the Merrill name will continue to apply to the firm’s “private wealth” division, but everything else will be known as Bank of America. With respect to Thain, Gasparino says he will likely stay through the transition and then leave.
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