B of A Moves on Merrill Lynch – Deal Reached Sunday

Most Recent:  AIG, Lehman, Merrill – What it All Means to You

Yesterday:  Lehman BK’s as 10 Banks Circling Their Financial Wagons

It’s a Done Deal:  Bank of America Reaches Deal for Merrill

 

Wow.  What Will Tomorrow Hold?  A pullback on Lehman and AIG news, tempered by a Merrill/B of A deal?  Or a Merrill/B of A deal rally, tempered by Lehman and AIG news?

 

Everyone now anxiously looks to Asian and European markets for a glimpse at What is Coming New York’s Way.  Good luck sleeping tonight everyone!  This may be a week of big plays – like Wells and JP Morgan may decide to do some quick snatches too, as a potential “Battle of the Survivors” looks to be brewing.

 

Related:  GSE Failures are Actually a Massive Regional Bank Bailout in Disguise: How the FED is planning to get the Lipstick on this Pig

  

A subsequent conversation with sources at B of A since originally posting this article reveals Bank of America is determined to move fast and furious on Merrill Lynch Monday in an effort to take advantage of what will surely be a sharp reaction by the markets to news that Lehman is filing for Bankruptcy.

 

Teams at B of A are moving rapidly to shore up terms of the deal tonight, and are working feverishly to secure at least a basic agreement with Merrill in efforts to stave off any competing bids that may drive up the purchase costs.

 

The terms are said to be Between $25 and $30 Per Share, in possibly an all-stock deal, which would certainly be beneficial for B of A, who has legal problems and losses mounting from their puzzling purchase of major liability and toxic mortgage producer Countrywide.

 

Such an Acquirement by Bank of America would position them as a leader in asset and wealth management worldwide, and would certainly soften the blow they felt from the Bear Stearns Deal.

 

My source reiterated B of A’s high priority mode on this, saying  that “they want the deal ready to go in the morning.  They are moving double-time on this..”

 

This just in – The best analysis I have seen on Bank of America and Merrill, FACTBOX: Five facts about Merrill Lynch and Bank of America:

-The banks that merged to form Bank of America in 1998 — NationsBank and BankAmerica — have historically bought distressed assets on the cheap. Bank of America Chief Executive Kenneth Lewis has made his bank by far the most aggressive acquirer of any major U.S. bank this decade, having spent more than $100 billion on such targets as FleetBoston Financial Corp, MBNA Corp, LaSalle Bank Corp and Countrywide Financial Corp.

-Bank of America had a market capitalization of $153.9 billion as of Friday’s close, making it the largest U.S. bank by market value. Merrill Lynch had a market cap of $26.1 billion, making it the third largest U.S. investment bank.

-Lewis, from Bank of America, famously said last October that he had all the fun he could stand in investment banking. But he also said on May 15 that the U.S. economic downturn will encourage, or force, more investment banks to merge with commercial banks to better protect themselves against tough markets. Lewis also publicly regretted his October comment.

-Bank of America has been trying to bolster its retail brokerage for years and this acquisition will make Merrill, the world’s largest broker, even bigger. But combining brokerage and retail banking has proven enormously difficult and banks such as Citigroup Inc have struggled to force the two businesses to complement each other.

-Stanley O’Neal, the former chief executive of Merrill, last year approached then-Wachovia Corp Chief Executive Ken Thompson about a potential merger last year, as huge mortgage losses loomed. He did so without alerting his board beforehand, which was one of the reasons he was fired.

 

I received a phone Sunday afternoon call from a well placed source at Bank of America who was to chat-up some of the days rumors surrounding what appears to be Failed Talks in New York led by the Federal Government to shore up BK bound Lehman Brothers before the Asian markets open Monday.

 According to conversation, Bank of America only had a passing interest in making a play for wounded fish Lehman brothers, but only if the the deal was really sweetened up with Taxpayer Money.  The Government has maintained that Will Not Happen.

Faux Biz reporter Adam Shapiro – who was reporting from in front of Lehman HQ in NY as I wrote this piece, giving the latest Lehman Brothers updates to the sounds of a street musician playing the theme from Titanic, I kid you not – stated that Lehman employees have been informed to await an email that will instruct them as to whether they should report to work Monday morning – ouch.

Looks like they are still burning the midnight oil at Lehman, and the executive parking lot is is full.

Faux also reported that their Lehman sources said to expect a BK filing by midnight Sunday.

B of A understandably feels a little slighted by the knee-jerk support rival JP Morgan enjoyed in the Bear Stearns deal, and was looking for something that was never there in the way a Federal support for the deal.

Apparently B of A is more interested in landing a bigger fish this year - Merrill Lynch For at Least $38.25 billion - and they may have a real fight on their hands, as Merrill dwarfs Lehman in every aspect and will definitely have a lot of fight left if the takeover bid is unfriendly in nature.

To further complicate B of A’s plan, UK based Barclays (Rumor: Barclays (BCS) Pulls Out Of Lehman (LEH) Bid) is also looking to make a play for Merrill Lynch, especially if the lack of a Lehman deal this weekend causes a Mass Sell-Off in the Financials Monday. 

If financials open 20% off Fridays close on the Lehman news, there could be a feeding frenzy like we have not seen surrounding several trouble lenders, but particularly Merrill Lynch.

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