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Monday, October 27, 2003 |
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Big bank merger Bank of America (BofA), the #3 bank by assets in the United States, has made an offer to buy FleetBoston bank, #7, for $47 billion. Fleet is the dominant bank in New England, and this addition expands Bank of America's coast-to-coast reach to a new region. The new bank will have the largest consumer banking operation in the nation. It will also cover more territory than any other US bank. The new bank will be second only to Citigroup in overall size, displacing current number two bank, J.P. Morgan Chase. BofA claims that it will also be the fourth-most profitable company in the world. It will be the top lender to small business in the US. The merger will cost BofA big, 41% over the current price of FleetBoston stock. It is assumed that BofA had some serious bidding competition, including Bank One and Citigroup. The acquisition is the largest M&A deal of the year, and rates as the 15th largest of all time. (all subject to the usual antitrust approvals.) According to the Wall Street Journal (10/27/03), the new company will have 9.8% of all US banking deposits in the U.S., close to the FCC limit. It will also be either number one, two, or three in 21 of the 29 states it will operate in. In an online report on The Street.com, FleetBoston CEO Charles Gifford explained in a news conference "that Fleet began looking into merger opportunities about a year ago." It became increasingly clear that scale is a tremendous advantage, if properly managed," he said. "We did not have the scale of other banks." Bank of America's last big merger was with NationsBank, five years ago. In that transaction, NationsBank was the acquirer, but it kept the Bank of America name. That remains the biggest US bank merger ever ($57 billion), whereas the current BofA-Fleet merger is the second largest. All this happens as Bank of America is heavily embroiled in the current mutual fund fraud case, where BofA officials helped hedge funds beat the market by allowing them to trade while the market was closed to other customers. As one analyst quoted in the Charlotte Business Journal put it " "This should get the juices flowing as far as further consolidation in the industry." The bank merger mania of five years ago is widely predicted to be on again. Fleet Boston can trace its roots back to 1794 when the Massachusetts Bank was founded in Boston by, among others, John Hancock. By 1903 it merged with First National Bank of Boston, later it became Bank of Boston. In 1995 Bank of Boston merged with BayBank, changing its name to BankBoston, In 1999 that firm merged with investment bank Fleet Financial Group. The new company, renamed FleetBoston acquired Summit Bank in New Jersey in 2000. Charlotte-based NationsBank, formerly named NCNB, became one of the nation's leading financial powers following its acquisition in 1988 of First Republic Bank of Texas and its merger in 1991 with Atlanta-based C&S/Sovran. In 1996 NationsBank bought our Boatmen's Bancshares, the leading bank in Missouri. In 1977 it bought investment firm Montgomery Securities (San Francisco), and Barnett Bank, the largest bank in Florida. In 1998 it bought Bank of America, taking its name. Bank of America was started in San Francisco in 1904, as the Bank of Italy. The old BofA had swallowed up Seafirst and Security Pacific (including Ranier) among others in the 1980s.
5:40:23 PM 
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Last update: 9/4/2007; 8:55:44 PM .
