0 votes

Hard to Tell What's Real and What Isn't These Days

something to think about!!!!!!

I am more concerned about the return of my money than the return on my money. --Mark Twain

Posted On: Monday, September 15, 2008, 11:09:00 AM EST

Hard to Tell What's Real and What Isn't These Days

Author: David Duval

Dear Jim,

Maybe I’m missing something here but it sure doesn’t make a lot of sense to me that Bank of America would pay a 70% premium to market for a company nobody wants! Is this a bit of a smokescreen to put a bid under Merrill to make sure it doesn't go under at the same time as Lehman?

David D

Bank of America buys Merrill - $50 billion
Soon after its talks to acquire Lehman Brothers broke down, Bank of America moves to scoop up Merrill Lynch.
Last Updated: September 15, 2008: 2:12 AM EDT

NEW YORK (CNNMoney.com) -- Bank of America said Monday that it has bought Merrill Lynch in an all-stock deal valued at as much as $50 billion.

The purchase price would value the company at more than $29 a share, at least a 70% premium from Merrill's closing price on Friday of $17.05.

The acquisition was put together Sunday as Wall Street awaited the fate of battered investment bank Lehman Brothers (LEH, Fortune 500), which early Monday said it would file for bankruptcy.

Throughout the weekend, Bank of America (BAC, Fortune 500) was considered a potential acquirer of Lehman, though those discussions had broken off by Sunday afternoon.

Like Lehman, Merrill Lynch (MER, Fortune 500) has been suffering from bad real estate bets and its stock price has been punished severely, losing 27% last week. Shares are down 65% this year.

Concerns had been growing that Merrill would need to take more writedowns and raise more capital to shore up its balance sheet. Merrill has posted net losses of more than $17 billion over the past four quarters.

"The Merrill deal addresses what the market fears most right now - a flood of assets hitting the market," said David Alpert, managing director of Westwood Capital.

A spokesperson for Merrill Lynch would not comment. Attempts to reach Bank of America for comment were unsuccessful.


Trending on the Web

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.

Didnt BOA help out with the Countrywide "problem" earlier?

I think they are playin ball with the Man. But, when you bail out your regulator the benefits don't have to be immediately evident to be real and long lasting. Might be better to have our politicians cater to Charlotte than Wall Street.

Probably to spread out the timing

of the falls, so it doesn't look so bad happening all at once.

BTW, BOA is the bank that all the gov't "secret squirrels" use, in case you didn't know.