Merrill Lynch's Sale to Bank of America


Summary: Throughout the 2nd half of 2007 and the most part of 2008, Merrill Lynch was having a lot of problems. They were forced to remove CEO Stan O'Neal in November of 2007, were forced to sell off their commercial finance business to General Electric in December 2007, and had significant losses in their stock price in the initial stages of 2008. After a scandal regarding the misrepresentation of previously sold mortgage-backed security values, Merrill was forced to pay over $30 billion in losses, and subsequently froze hiring. Bloomberg then reported that Merrill Lynch had lost $51.8 billion in mortgage-backed securities as part of the subprime mortgage crisis. Ultimately, trading partner's loss of confidence in Merrill Lynch's solvency and ability to refinance short-term debt led to its sale. On September 14, 2008, Bank of America announced it was in talks to purchase Merrill Lynch for $38.25 billion in stock. The Wall Street Journal reported later that day that Merrill Lynch was sold to Bank of America for 0.8595 shares of Bank of America common stock for each Merrill Lynch common share, or about US$50 billion or $29 per share, a 70.1% premium over the September 12 closing price.

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