In what is being viewed as a rescue mission, Bank of America has paid $29 US per share for Merrill Lynch. While this deal represents a 70% premium to the stocks closing price on Friday it should be remembered that the shares were trading at $90 US only last year. Bank of America believes that the deal will be earnings enhancing from 2010.
Under terms of the transaction, Bank of America 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.
Commenting on the deal 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. Together, our companies are more valuable because of the synergies in our businesses.”