Founded in 1985 and based in California, First Republic provides personalized private banking services to individuals of high wealth, with its 43 branches located in some of the richest areas in the US.
Under the agreement, it will operate as a stand-alone brand within Merrill Lynch, retaining its name, its current management structure and San Francisco headquarters.
Commenting on this latest acquisition, his bank's largest for a decade, Robert J McCann, the president of Merrill Lynch's global private client business said: "First Republic will enable Merrill Lynch to accelerate its strategic objective of growing its high net worth business.
"We expect our entire private client organisation to benefit from its outstanding history, excellent credit and lending capabilities and its experienced management team."
The deal will see Merrill Lynch pay 24 times the forecast earnings of First Republic for 2007 and 3.4 times its current book value.
As of September 30th last year, the Californian firm had assets of $10.7 billion, loans of $7.6 billion, deposits of $7.9 billion and assets under management or administration of $16.4 billion.