It's a New Landscape on Wall Street
Wall Street woke up to a new landscape today, with Lehman Brothers filing for one of the largest bankruptcies in American history and Bank of America announcing a $50 billion acquisition of Merrill Lynch. The news sent the stock tumbling 300 points, erasing more than $300 billion in market value, while the relative safety of Treasury bonds is soaring.
AP Photo/Craig Ruttle
Merrill Lynch Chairman and CEO John Thain, left, listens as Bank of America Chairman and CEO Ken Lewis speaks at a news conference today at New York.
The $29-a-share, all-stock purchase of Merrill is a 70% premium over Merrill's share price of $17.05 at the market's close Friday, although it is
a 63% discount from its 52-week high of $78.66. Bank of America's stock is trading down 14% to $28.95 a share on news of the deal.
Meanwhile, Lehman Brothers, burdened by $60 billion of difficult-to-value real-estate holdings, filed a Chapter 11 bankruptcy petition in U.S.
Bankruptcy Court after attempts to rescue the 158-year-old firm failed over the weekend.
"This is a strategic opportunity of a lifetime," the chief executive of Bank of America, Ken Lewis, said at a press conference this morning, adding that the "thundering herd" of Merrill's 16,000-strong retail sales force is the "crown jewel" of the firm.
The stunning deal was finalized in just 48 hours, following a marathon weekend where legions of staff from the Federal Reserve, the Securities and Exchange Commission, and the Treasury Department, as well as chief executive of Merrill Lynch, John Thain, and other investment banking heads, crowded into the Fed's headquarters in Lower Manhattan to hash out the implications of a Lehman Brothers bankruptcy.
On Saturday morning, Mr. Thain called Mr. Lewis regarding a possible merger. "I made no other phone calls," Mr. Thain said, when asked if he had looked for other possible acquisition partners. "There was absolutely no pressure from regulators" to do a deal, Mr. Lewis added.
