Bank of America Corp (BoA), the largest US retail bank buys Merrill Lynch, the world’s largest broker and investment bank. As per the $50 bn deal BoA will swap 0.8595 of its shares; it’s equivalent to $29 price per share as per Friday’s close price of Merrill. It’s a huge premium to its closing price on Friday of $17. But don’t forget that Merrill’s share price had fallen freely in recent times.
This acquisition will start giving benefits to BoA after 2012. BoA which has $154bn market capitalization had abandoned talks with Lehman as there were not enough supportive assurances from the Federal bank and as a consequence Lehman chose to file for bankruptcy.
Morgan Stanley was also in the race but the time Merrill had given to examine its books was too short for Morgan. Experts feel it as a very positive move otherwise the situation would have been worse with one more investment bank going bankruptcy
Sathish Emmadi
Sathish Emmadi is a co-founder & editor at Lastbull.com. He is presently working in IT for one of the world’s top mutual fund companies. Handled multiple projects in BFSI (Banking,Financial Services and Insurance) domain. An Engineering Graduate from NITW.
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