Bank of America has finally made its move and bought big. The US banking giant has confirmed that it has agreed to buy FleetBoston Financial in a deal worth $47bn. The transaction will create the second largest banking group in the US.
Fleet will go for $45 a share, a massive 41% premium on its closing price last Friday. Shares in Barclays fell this morning on the news as investors had thought that Bank of America was a potential buyer for the UK bank. A move for Barclays looks unlikely now. CityNews had dismissed a Bank of America / Barclays tie-up, and still feels that the US giant is more likely to make a grab for the much smaller and less expensive Abbey.
The new combined bank will initially have 180,000 employees, making it second in the US only to Citigroup. Investment bankers at Goldman Sachs and Morgan Stanley will be rubbing their hands together in glee today - both were advising on the deal.
This deal is the biggest M&A transaction in any sector since Pfizer's $64bn takeover of Pharmacia in July last year - further proof, if any was needed, that merger and acquisition activity is back on the up. The transaction is also the second biggest banking acquisition ever. The largest also involved Bank of America and was the 1998 $57bn takeover by NationsBank.