BofA should benefit from Merrill Lynch buy

NEW YORK (AP) - Bank of America Corp. said early Monday it would acquire Merrill Lynch in an all-stock transaction worth about $50 billion that should lift the uncertainty shrouding Merrill since the start of the credit crisis over a year ago.

Charlotte, N.C.-based Bank of America has the most deposits of any U.S. bank, while Merrill Lynch & Co., Inc. is the world's largest and most widely recognized brokerage. A combination of the two will create a global financial services giant involved in everything from fixed-income trading to stock underwriting to credit card lending, which will rival Citigroup Inc., the biggest U.S. bank in terms of assets.

Adding to the momentous day, Lehman Brothers, an investment bank that predates the Civil War and weathered the Great Depression, filed the largest bankruptcy in American history. Burdened by $60 billion in soured real-estate holdings, the company filed a Chapter 11 bankruptcy petition in U.S. Bankruptcy Court after attempts to rescue the 158-year-old firm failed.

The stunning makeover of the Wall Street landscape sent stocks falling precipitously Monday, with the Dow Jones industrials sliding 500 points in their largest point drop since the September 2001 terrorist attacks.

Despite the near-panic on Wall Street, Rob Kincaid of Sandpoint's Edward Jones Investments said the Merrill Lynch purchase should end up paying dividends for Bank of America and its investors.

"We like the long-term strategic fit of adding Merrill's retail sales force to Bank of America's retail branches. Their investment banking operations are generally stronger than Bank of America's," Kincaid said. "That combined company should be a pretty formidable player long-term in changing the investment banking environment."

Lehman Brothers shareholders, however, have less light at the end of their own tunnel, according to Kincaid. While he is unsure how the process will unfold, Kincaid said it would be unlikely for shareholders to get any return on their investment once the company begins its liquidation procedure.

Even in the face of such tumultuous financial news, Kincaid said the long-sighted investor should continue to be in good shape.

"As far as our own clients go, we've always been in the habit of making sure that we set our clients' expectations in the right place so that these kind of short-term headlines don't effect their long-term strategies," Kincaid said.

—Staff writer Conor Christofferson contributed to this report.