NEW YORK CITY — Bank of America Corp. has agreed to buy Merrill Lynch & Co., the world’s largest retail brokerage, for $50 billion.
In addition, Lehman Brothers Holdings has announced it will file for Chapter 11 bankruptcy protection.
Bank of America has agreed to pay 0.8595 shares of Bank of American common stock for each Merrill Lynch share. The price is 1.8 times stated tangible book value. The bank is buying about $44 billion of Merrill’s common shares, as well as $6 billion of options, convertibles, and restricted stock units.
James Ellman, portfolio manager at hedge fund Seacliff Capital, says the move gives Bank of America strength in areas where they were weak.
“Now Bank of America has one of the best and largest retail brokerages in the country, one of the top investment banks in the world, and a large stake in one of the best investment managers in the world,” says Ellman.
The deal has been approved by the directors of both companies. Three Merrill directors will join the Bank of America board. The transaction is expected to close first quarter 2009.