Fed approves Bank of America’s acquisition of Merrill Lynch
27 Nov 2008
The Federal Reserve on Wednesday approved Bank of America's acquisition of Wall Street giant Merrill Lynch & Co.
The move will be put to vote for shareholders for both companies on 5 December. Bank of America said it expects the deal to close by the end of the year.
The purchase was initially worth about $50 billion, but the value has fallen as Bank of America's stock has slumped. Bank of America's shares climbed 4 per cent on Wednesday to $15.43; Merrill Lynch's shares rose more than 7 per cent to $12.21.
Merrill Lynch chief executive John Thain had initiated the move on fears of his firm succumbing to the troubled conditions in the market. Thain had called up Bank of America's Ken Lewis which led to an agreement in a weekend.
The purchase, initially worth $50 billion, saw a sharp value erosion to about half the amount as Bank of America's stock took a beating. However, following the developments this week, Bank of America's shares rose 4 per cent on Wednesday to $15.43; Merrilly Lynch shares rose more than 7 per cent to $12.21.
The combined company would have about $852 billion in deposits, amounting to approximately 11.9 per cent of the US total according to the Fed order.
The deal comes as the latest in a series of quick mergers that seek to forge a union of stronger institutions with struggling ones in the backdrop of the uncertain conditions in the financial markets.
In the union, Bank of America will merge its massive retail banking operations with Merrill's capital markets businesses. According to Lewis, the combination would create the world's premier financial services company with unrivalled breadth and global reach. The combined company would control $ 2.7 trillion in assets.