Updated from Sunday, Sept. 14

Merrill Lynch ( MER) and Bank of America Bank of America ( BAC) confirmed they have agreed to a deal in which Bank of America would buy Merrill in a $50 billion all-stock transaction.

The combination has been approved by the boards of both companies.

Under terms of the deal, Bank of America would exchange 0.8595 a share of Bank of America common stock for each Merrill Lynch common share. The price is 1.8 times stated tangible book value.

The transaction values Merrill at $29 a share.

Shares of Bank of America finished Friday up 68 cents at $33.74. Merrill Lynch shares closed the session down $2.38, or 2.38%, at $17.05.

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 Merrill deal adds to a string of Bank of America acquisitions that includes mortgage lender Countrywide Financial. Merrill will give Bank of America a well-known investment bank and its vast ranks of stock brokers, the Journal noted.

Both companies refused to comment, according to the Journal.

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).

Lehman had been hoping to find a buyer over the weekend, but the leading contender, U.K.-based Barclays, reportedly walked away from a bid because U.S. government officials didn't want to provide financial backing for a deal.

Bank of America reportedly had also considered buying Lehman, but discussions failed to produce a deal. With Lehman at the brink, Bank of America turned to Merrill, which many investors had speculated would be the next big financial firm to go under.

This article was written by a staff member of TheStreet.com.

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