ATLANTA - Two mega acquisitions in the banking sector have been completed following the biggest financial crisis to hit the United States since the 1930s, capping a year in which Wall Street stocks were hammered, home foreclosure rates soared and job losses mounted.
Bank of America Corp. said Thursday it has completed its $19.4 billion all-stock purchase of Merrill Lynch & Co., while Wells Fargo & Co. said it has completed its $12.7 billion all-stock purchase of Wachovia Corp.
Merrill Lynch’s sale to Charlotte, N.C.-based Bank of America, announced Sept. 15, creates the nation’s largest financial services company. San Francisco-based Wells Fargo’s purchase of Wachovia, a deal that was announced Oct. 3, creates a coast-to-coast powerhouse with community banks in 39 states and the District of Columbia.
Shareholders of Merrill Lynch received 0.8595 shares of Bank of America common stock for each common share of Merrill Lynch they owned. That valued Merrill Lynch at $19.4 billion based on 1.6 billion Merrill common shares outstanding as of the last filing date and Wednesday’s Bank of America closing stock price of $14.08.
Wachovia shareholders received 0.1991 shares of Wells Fargo common stock in exchange for each share of Wachovia common stock they owned. That valued Wachovia at $12.7 billion based on 2.16 billion Wachovia common shares outstanding as of the last filing date and Wednesday’s Wells Fargo closing stock price of $29.48.
Besides acquisitions, the turmoil in the banking sector has brought announcements of big job cuts and loans to several banks from the government’s $700 billion rescue fund.
The Bank of America-Merrill Lynch deal was struck as the solvency of investment banks was in grave doubt, and kept Merrill, which lost billions of dollars in the subprime mortgage crisis, from a complete meltdown like the one suffered by Lehman Brothers Holdings Inc., which was forced to file for bankruptcy.
New York-based Citigroup agreed to step in and buy Wachovia’s banking operations for $2.1 billion with the help of the Federal Deposit Insurance Corp. But only four days later, Wells Fargo made a higher offer that did not hinge on any government support and ultimately won the right to purchase all of Wachovia and its businesses and obligations, including all of its banking deposits.
On Dec. 11, Bank of America said it expected to cut 30,000 to 35,000 jobs over the next three years.
The final number could be even higher, analysts say. Bank of America said at the time it hadn’t yet completed its analysis for eliminating positions, and wouldn’t until early this year. Including Merrill Lynch, Bank of America has about 308,000 employees. It said the cuts would affect workers from both companies.
Bank of America reiterated Thursday it expects to achieve $7 billion in pretax expense savings by 2012. It said the cost reductions would come from a range of sources, including the previously announced job cuts and the reduction of overlapping technology, vendor and marketing expenses.
Bank of America said it will have the largest wealth management business in the world with roughly 20,000 financial advisers and more than $2 trillion in client assets.
It said the combination also adds strengths in debt and equity underwriting, sales and trading, and merger and acquisition advice, creating significant opportunities to deepen relationships with corporate and institutional clients around the globe.
As for Wells Fargo, it said that with Wachovia, it now has $1.4 trillion in assets and for the first time has a community banking presence in Alabama, Connecticut, Delaware, Florida, Georgia, Kansas, Maryland, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia and Washington, D.C. As of Thursday, Wells Fargo and Wachovia customers have free use of all of the company’s combined ATMs, Wells Fargo said.
There did not appear to be any plans to immediately change the Wachovia name to Wells Fargo. A Nov. 24 regulatory filing said that the plan to integrate Wells Fargo and Wachovia operations was still being developed. The filing said an estimated $1.9 billion in costs was expected to be incurred over time due to “branch and administrative site consolidations, name change and signage.”
The chief of Bank of America has said previously the bank intends to keep the Merrill Lynch name intact.