Bank of America Corp. (BAC) announced Wednesday that it has received approval from the board of the Federal Reserve System for its proposed $50 billion takeover of Merrill Lynch & Co. Inc. (MER).
Charlotte, North Carolina-based Bank of America plans to close the transaction by the end of the year, pending shareholder and other regulatory approvals.
In September, Bank of America agreed to buy brokerage giant Merrill Lynch in a $50 billion all-stock transaction, which had been on the verge of a collapse following the unprecedented credit market turmoil that saw Lehman Brothers Holdings Inc. (LEHMQ.PK) go bankrupt and the government bailout of insurance major, American International Group Inc. (AIG).
Under the deal, Bank of America would exchange 0.8595 shares of its common stock for each Merrill Lynch common share. The price is 1.8 times the stated tangible book value.
The credit crisis has led to over $510 billion in write-downs, with several big financial institutions its casualties. In 2007, Bear Stearns folded into JP Morgan Chase (JPM) in a Fed-assisted takeover. In July, Bank of America completed the acquisition of Countrywide Financial Corp. to create the nation's leading mortgage originator and servicer.
Once the acquisition is completed, Bank of America will gain Merrill Lynch's over 16,000 financial advisers, thus becoming the largest brokerage in the world with more than 20,000 advisers and $2.5 trillion in client assets.
Further, Merrill Lynch enhances Bank of America's current strengths and creates new ones, particularly outside the U.S. In addition, Merrill Lynch adds strengths in global debt underwriting, global equities and global merger and acquisition advice.
Bank of America will be the number one underwriter of global high yield debt, the third largest underwriter of global equity and the ninth largest adviser on global mergers and acquisitions based on pro forma first half of 2008 results, once the merger is completed.
Bank of America said that Merrill Lynch CEO, John Thain, would serve as president of global banking, securities and wealth management. Thain would oversee the global corporate and investment banking and most of Bank of America's global wealth and investment management. Those operations will be merged with similar functions at Merrill Lynch.
Bank of America, like many of its peers, is still under the impact of the mortgage crisis. Last month, Bank of America reported a sharp decline in third-quarter profit as a 21% growth in revenue was offset by a significant increase in credit costs, reflecting the continuing deterioration in the mortgage market. The company also slashed its quarterly dividend by 50% and plans a $10 billion stock-sale to raise capital to achieve an 8% Tier 1 capital ratio.
Bank of America, which has been considered as one of the strongest financial institutions in the U.S, said credit quality continued to weaken during the quarter and delinquency trends first experienced in the home equity and homebuilder portfolios have now spread into the first mortgage, unsecured consumer lending and credit card portfolios.
Last month, Bank of America joined investment banks Merrill Lynch, Goldman Sachs Group Inc. (GS), JPMorgan Chase & Co. (JPM), Morgan Stanley (MS), Wachovia Corp. (WB), and Deutsche Bank AG (DB) in reaching settlements with regulators over their sales and marketing of auction-rate securities. These settlements are part of a widening crackdown on the way Wall Street banks have sold some $330 billion of the auction-rate securities.
The company agreed to buyback auction rate securities, or ARS, held by its retail customers to settle an enquiry by securities regulators, alleging that the company misrepresented the ARS to clients as being safer and more liquid than they really were. The company said it would redeem about $4.5 billion of failed ARS issued to 5,500 investors and agreed to pay a penalty of $50 million.
New York-based Merrill Lynch reported a wider loss for the third quarter, hurt by mortgage-related items. Results were hit hard by certain non-compensation expense items such as a $2.5 billion non-tax deductible payment to Temasek Holdings related to the July common stock offering and a $425 million expense arising from Merrill Lynch's previously announced offer to repurchase auction rate securities from its private clients and the associated settlement with regulators.
Bank of America closed Wednesday's regular trading session at $15.43, up 63 cents or 4.26% on a volume of 118.85 million shares. In after-hours, the shares lost 10 cents. The stock has been moving in a range of $10.01 - $47.00 for the past 52 weeks, with a three-month average volume of about 116.84 million shares.
Merrill Lynch ended Wednesday's regular trading session at $12.21, up 85 cents or 7.48% on a volume of 37.95 million shares. In the after-hours, the shares gained 9 cents. The stock has been moving in a range of $7.08 - $63.11 for the past 52 weeks, with a three-month average volume of about 53.05 million shares.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.