Defending his controversial purchase of Countrywide Financial Corp. early this year, Bank of America Corp. Chief Executive Kenneth D. Lewis emphasized that the nation's largest consumer bank would now be No. 1 in three "anchor" financial products: deposits, credit and debit cards and mortgages.
Make that four now.
Bank of America's agreement late Sunday to acquire Merrill Lynch & Co., which has 16,700 financial advisors across the country, would make it the largest retail brokerage in the country as well, not to mention an investment bank with global reach and a powerhouse in business banking.
"There's just no other company in the world that will have this wide a range of capabilities," said a person well-acquainted with BofA's thinking who was not authorized to speak publicly because the deal, agreed to in principle late Sunday, had yet to be signed.
Bank of America, based in Charlotte, N.C., was to swap stock worth $29 a share for each share of New York-based Merrill Lynch, valuing Merrill at about $50 billion.
Merrill's shares dived 36% last week, to end Friday at $17.05, a 12-year low. Its stock hit an all-time high in January 2007, when its market value was about $140 billion.
That was before the credit crisis set in but just after Ownit Mortgage Solutions of Agoura Hills, a subprime lender of which Merrill owned 20%, declared bankruptcy. That proved to be the opening act in the colossal fiasco that now threatens the U.S. financial system.
It started out differently last week, when federal officials urged Bank of America to consider taking over Lehman Bros. Holdings Inc., another august Wall Street firm reeling from losses on mortgage securities. But the government was unwilling to provide financial backing for that deal, as it had done when JPMorgan Chase & Co. took over Bear Stearns Cos. in an earlier government-arranged rescue, a source close to Lewis said.
"We looked at Lehman very hard," this person said. "And we finally told the government that for us to do it would require some [federal] assistance. The government said it couldn't provide assistance this time, which we understood. And we said, 'OK, we just can't do it.' But then this opportunity with Merrill Lynch came up."
Implying that Bank of America and Merrill Lynch had seriously talked about a merger before, the source said BofA was "extremely familiar" with Merrill's operations. "The companies know each other very well."
