Bank of America has bought Merrill Lynch, the most recognizable name in the brokerage industry, in an all stock transaction valued at $50 billion.
In a statement on its Web site, Bank of America Chairman and Chief Executive Officer Ken Lewis, said: "Acquiring one of the premier wealth management, capital markets, and advisory companies is a great opportunity for our shareholders."
Meanwhile, Merrill Lynch's chairman and CEO John Thain added in the statement that his firm "is a great global franchise and I look forward to working with Lewis and our senior management teams to create what will be the leading financial institution in the world with the combination of these two firms."
The sale marks another chapter in the subprime, mortgage and credit crises that have ravaged Wall Street and has led to the downfall of Bear Stearns earlier this year and the reported near bankruptcy of Lehman.
Merrill was hit with massive writedowns and losses over the past several months. The problems led to the departure of former Merrill CEO, Stanley O'Neal. Thain was brought in to repair the ailing firm.
Now, the cure appears to be the sale to Bank of America. The combination would give Bank of America the largest brokerage financial advisory sales force in the world with 20,000 advisors and $2.5 trillion in assets, according to a press release.
In the Merrill/Bank of America deal, the acquiring institution would exchange .8595 shares of Bank of America common stock for each Merrill Lynch common share. The price is 1.8 times stated tangible book value.
Bank of America expects to achieve $7 billion in pre-tax expense savings, fully realized by 2012. The acquisition is expected to be accretive to earnings by 2010.
The deal is expected to close in the first quarter of 2009. It has been approved by directors of both companies and is subject to shareholder votes at both companies and standard regulatory approvals. Under the agreement, three directors of Merrill Lynch will join the Bank of America Board of Directors.