Bank of America Corp is in advanced talks to acquire Merrill Lynch & Co Inc for at least $38.25 billion in stock, the New York Times said on Sunday, citing people briefed on the negotiations, reported Reuters.
John Thain, Merrill's chief executive, and Kenneth Lewis, chief executive of Bank of America, were present at discussions over the weekend regarding the fate of Lehman Brothers Holdings Inc.
A transaction valuing Merrill at $25 to $30 per share could be announced as soon as Sunday night, the newspaper said. Merrill shares closed at $17.05 on Friday.
A Merrill Lynch spokeswoman and a Bank of America spokesman did not immediately comment. The Wall Street Journal also reported the talks.
Merrill has been hit hard by the credit crisis and has written down more than $40 billion over the last year.
The bank has also attempted to sell off much of the toxic debt that has been causing the company to hemorrhage capital. Last month, Thain arranged to sell over $30 billion in packaged debt securities to Dallas-based private equity firm Lone Star Funds.
In spite of these exposures, the bank is seen by some as undervalued, given that it has the largest retail brokerage by assets under management and number of brokers, and it also has a valuable 49.8 percent stake in the profitable asset manager BlackRock Inc.
"It could be a powerful fit," said Rick Meckler, chief investment officer at LibertyView Capital Management in New York. But he added: "Merrill Lynch has significant exposures and Bank of America would need enough balance sheet to handle that."