Merrill and BoA 'to merge'

15 September 2008

Merrill Lynch has agreed to merge with Bank of America (BoA), in a $50 billion deal.

The merger has come about thanks to Merrill's concerns over its balance sheet, which has been hammered by credit crunch-related asset writedowns.

It had faced a corresponding loss of its share price last week.

The final straw for the bank is thought to have come with fellow Wall Street giant Lehman Brothers' move towards declaring bankruptcy - with many speculating that Merrill would be the next bank to fall.

A statement from BoA mapped out the terms of the deal: Merrill is to exchange each BoA share for 0.85 of its own, which has been priced at $29.

Analysts praised the merger, which effectively guarantees that the 94-year-old bank will not collapse in the manner of Lehman or Bear Stearns.

"If BoA can put a fence around the bad assets, that retail distribution is a powerhouse,'' Peter Sorrentino, senior portfolio manager at Huntington Asset Advisors, told Bloomberg.

"The Merrill Lynch combination makes more sense than a Lehman deal."

Global banks have faced over $400 billion of credit crunch related losses since the beginnings of the crisis last year.

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