Here's a tidbit of news for those wise traders out there on VGC:
Bank of America in talks to buy Merrill: report
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NEW YORK (Reuters) - Bank of America Corp is in advanced talks to acquire Merrill Lynch & Co Inc for at least $38.25 billion in stock, the New York Times said on Sunday, citing people briefed on the negotiations.
The deal comes as bankers and regulators met in New York to figure out whether to rescue Lehman Brothers Holdings Inc, and if so, how. Those talks seemed increasingly likely to result in Lehman's liquidation.
Merrill's talks with Bank of America are "advanced," according to the New York Times, and a transaction valuing Merrill at $25 to $30 per share could be announced as soon as Sunday night, the newspaper said. Merrill shares closed at $17.05 on Friday.
A Merrill Lynch spokeswoman and a Bank of America spokesman did not immediately comment. The Wall Street Journal also reported the talks.
Merrill has been hit hard by the credit crisis and has written down more than $40 billion over the last year.
The bank has also attempted to sell off much of the toxic debt that has been causing the company to hemorrhage capital. Last month, Thain arranged to sell over $30 billion in repackaged debt securities to Dallas-based private equity firm Lone Star Funds.
"I'm surprised that Merrill Lynch would want to sell at this point," said Bill Fitzpatrick, an analyst at Optique Capital in Milwaukee.
"They seem to be taking steps to improve their business. They have sold off a lot of their toxic assets. Merrill seems to be progressing to me."
In spite of these exposures, the bank is seen by some as undervalued, because it has the largest retail brokerage in the world by assets under management and number of brokers. Analysts have valued that business at over $25 billion. Merrill also has about a 45 percent stake in the profitable asset manager BlackRock Inc, worth more than $10 billion.
"It could be a powerful fit," said Rick Meckler, chief investment officer at LibertyView Capital Management in New York. But he added: "Merrill Lynch has significant exposures and Bank of America would need enough balance sheet to handle that."
DUE DILIGENCE
Meckler also noted that the due diligence Bank of America would need to do on Merrill's books would be a serious undertaking, given the complexity of the company's exposure to mortgage-related securities and other complex debt.
On the other hand, Bank of America has done a quick acquisition in the past. In 2005, the bank bought credit card company MBNA after less than a week of due diligence, with Lewis saying the company was comfortable with the acquisition because it knew the people and business well.
Bank of America under Lewis has in fact become renowned for large acquisitions and it has spent over $100 billion since 2004 buying other companies.
Most recently it acquired troubled mortgage lender Countrywide Financial Corp and -- although many were skeptical about this purchase -- analyst Dick Bove said in a report last week this could prove to be a master stroke by Lewis, since the government takeover of mortgage agencies Fannie Mae and Freddie Mac could fuel business for other lenders.
(Reporting by Elinor Comlay; Editing by Andre Grenon)
Url link: http://www.reuters.com/article/topNews/idUSN1445019920080914?sp=true
