Merrill Lynch, Bank of America: What You Need to Know

Merrill Lynch (MER Quote) and Bank of America (BAC Quote) have agreed to a deal in which Bank of America would buy Merrill in a multibillion-dollar all-stock transaction.

Get up to speed on this huge merger with TheStreet.com:

From Bank of America Agrees to Buy Merrill:

Bank of America expects to achieve $7 billion in pre-tax expense savings, fully realized by 2012. The acquisition is expected to be accretive to earnings by 2010.

The transaction is expected to close in the first quarter of 2009.

Three directors of Merrill Lynch will join the board of Bank of America.

"Acquiring one of the premier wealth management, capital markets, and advisory companies is a great opportunity for our shareholders," Bank of America Chairman and CEO Ken Lewis said. "Together, our companies are more valuable because of the synergies in our businesses."

"Merrill Lynch is a great global franchise and I look forward to working with Ken Lewis and our senior management teams to create what will be the leading financial institution in the world with the combination of these two firms," said John Thain, chairman and CEO of Merrill Lynch.

The reported deal came after Wall Street executives had been meeting Sunday in an effort to limit the damage from the likely liquidation of troubled investment bank Lehman Brothers (LEH Quote).

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From Merrill Brings a Lot of Baggage to BofA:

Bank of America Chairman and CEO Ken Lewis is calling the $44 billion acquisition of Merrill Lynch the "deal of a lifetime," but the merger of the two powerhouses is not without challenges.

Richard Staite, an analyst in London at Atlantic Equities, writes that the deal makes it more likely that BofA will have to cut its dividend.

Jeff Harte, an analyst at Sandler O'Neill & Partners, is specifically cautious about management's ability to have done "sufficient due diligence" on Merrill Lynch's $966 billion balance sheet, he writes in a note.

He too worries about "capital and management resource constraints" as BofA integrates its July acquisition of failed mortgage lender Countrywide Financial, which is still reeling from soured mortgages and home equity loans after the meltdown of the housing market.

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From BofA Deal Draws Mixed Reviews in Charlotte:

CHARLOTTE, N.C. -- Near the headquarters of Bank of America, the firm's move to acquire Merrill Lynch was generally viewed favorably Monday, but many in this city's sophisticated work force expressed skepticism about whether the financial-sector slump is near an end.

"You see Bank of America pick up Merrill Lynch, you like to think there is a rainbow after the storm," said Bob Gates, a quality assurance consultant at Wachovia (WB Quote), which is also based in Charlotte. "I don't think the world financial crisis is bottoming yet. There's a tremendous amount of bad debt out there, nobody's lending, and some people can't buy cars. But sometimes, before you see the light, you have to see the complete darkness."

The deal to buy Merrill Lynch "is a little scary," said Micah Sulewski, who works for a company that provides IT services to Bank of America. "You don't know what kind of rocks will be uncovered in terms of the risk. But the bank must have seen more value than risk."

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From Cramer Tackles Lehman, Merrill News (Video, Sept. 15):

Jim Cramer: "What happened with John Thain [CEO of Merrill Lynch] was that he recognized that no matter how much they [Merrill Lynch] sold of their bad mortgage portfolio... he had to sell or else they would take his stock down, and he wanted to do what was right for his shareholders. Ken Lewis [CEO of Bank of America] is a better manager. Bank of America is a better manager. They knew their customers better. Lehman, Merrill and Bear [Sterns] were the worst mortgage issuers of this era... This is a business that had been compromised by too much competition. In classic style, it's now consolidating." (Related: Cramer: There's a Reason Banks Rarely Merge on TheStreet.com TV)

To watch the video, click the player below: