Banking sector acquisitions completed for – Merrill Lynch and Wachovia

January 1, 2009

Bank of America Completes Merrill Lynch Purchase

(ChattahBox) — The new year has started with two mega acquisitions in the banking sector, that have been completed following the biggest financial crisis to hit the United States since the 1930s.

Merrill Lynch & Co.’s 95-year run as an independent company is coming to an end as Bank of America Corp. completed its acquisition of the broker for about $33 billion in stock.

Bank of America, the biggest U.S. home lender, closed the purchase today. the Charlotte, North Carolina-based company will replace New York-based Merrill Lynch in the Standard & Poor’s 500 Index.

Bank of America, announcing the merger on Sept. 15, valued the deal at about $50 billion. The transaction size has declined since then, as the bank’s share price tumbled 47 percent.

Bank of America plans on issuing 1.71 billion common shares, worth $24.1 billion at the current price, and replacing Merrill’s preferred shares with 359,000 new Bank of America preferred shares, it said in an Oct. 29 regulatory filing. Shareholders of Merrill Lynch received 0.8595 shares of Bank of America common stock for each common share of Merrill Lynch they owned.

Merrill Lynch was founded by Charles E. Merrill in January 1914 and evolved into the world’s biggest brokerage, with an army of 17,000 financial advisers. After more than $50 billion of losses and writedowns tied to the collapse of the U.S. subprime mortgage market, Merrill agreed in September to a sale, escaping the fate of bankrupt Lehman Brothers Holdings Inc.

Bank of America, led by Chief Executive Officer Kenneth Lewis, 61, plans to cut 30,000 to 35,000 positions from the combined companies in the next three years because of the merger and a weak U.S. economy. Merrill CEO John Thain, 53, will remain as president of investment banking, trading and brokerage.

Bank of America rose 84 cents, or 6.3 percent, to $14.08 yesterday in New York Stock Exchange composite trading, valuing Merrill shares at $12.10 in the stock-for-stock exchange. That’s 88 percent less than their high of $97.53 in January 2007.

Wells Fargo acquisition of Wachovia completed

As expected, Wells Fargo & Co. completed its $12.7 billion acquisition of Wachovia Corp. before the end of 2008. The deal closed on Wednesday. Wells Fargo, the biggest bank on the U.S. West Coast, closed the purchase nine days after it was approved by Wachovia shareholders.

Regulators had been pushing Charlotte, N.C.-based Wachovia to find a buyer after being crippled by housing loans — in part due to its 2006 acquisition of Golden West Financial Corp. of Oakland. Orgianlly New York-based Citigroup agreed to step in and buy Wachovia’s banking operations for $2.1 billion with the help of the Federal Deposit Insurance Corp. But only four days later, Wells Fargo made a higher offer that did not hinge on any government support and ultimately won the right to purchase all of Wachovia and its businesses and obligations, including all of its banking deposits.

The acquisition creates the nation’s fourth-largest bank by assets. The combined bank has more than 6,600 outlets in 39 states and Washington, D.C. The deal comes with some baggage. Wells Fargo Chief Executive Officer John Stumpf said as recently as Dec. 10 that Wachovia’s $482.4 billion loan portfolio will produce $60 billion in losses over the next three years, with about 60 percent coming from option adjustable-rate mortgages.

Wellls and Wachovia customers will immediately have free use of both banks’ ATMs.

Wells said it expects to write down $71.4 billion in assets acquired from Wachovia.


Comments

One Response to “Banking sector acquisitions completed for – Merrill Lynch and Wachovia”

  1. Alonzo West on January 1st, 2009 11:52 pm

    Borrowing money from central banks do not work. instead we still will have a falling economy and now are in more debt with the central banks. Watch that video posted below!

    Wake Up Call – New World Order Documentary

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