Bank of America buys out Merrill in bold move

— -- Bank of America's decision to acquire Merrill Lynch in an all-stock transaction — the culmination of 48 hours of frenzied negotiations — will give it the nation's largest retail brokerage network and a sizable investment banking presence.

It's a bold move and a noteworthy reversal for CEO Ken Lewis, who last fall, when steep trading losses in BofA's own investment banking division helped cut the bank's third-quarter profits by almost a third, said he wasn't interested in growing it.

"I've had all the fun I can stand in investment banking at the moment," he told banking analysts in a conference call, according to a transcript.

Lewis was more upbeat Monday about BofA's prospects with the nation's biggest brokerage house in its growing empire. Buying Merrill was the "strategic opportunity of a lifetime," Lewis said.

Investors were less enthusiastic. In a day that saw steep losses in the market, BofA's shares fell 21% to $26.55. Merrill's shares rose a penny to $17.06.

With the bank's shares worth less, that cuts the value of the transaction to less than $40 billion, or about $22 a share, from about $50 billion, or $29 a share, based on Friday's closing prices.

The acquisition is an aggressive move by Bank of America to expand its already gigantic financial footprint only two months after acquiring Countrywide, previously the nation's largest independent mortgage lender. It comes as a growing number of financial institutions are teetering amid a faltering economy and soured real estate investments.

Bank of America is already the largest credit card issuer and mortgage lender. But the merger — expected to close in the first quarter of 2009 — will boost its investment-management business because of Merrill's 50% ownership in BlackRock, a global asset manager with $1.4 trillion under management.