The agreement, if approved by shareholders and regulators, would move Bank of America into the nation’s second largest slot behind Citigroup, bumping J.P. Morgan Chase & Co. to No. 3. The deal would expand Bank of America into New England, where it currently lacks a presence, and reportedly eliminate the Fleet name.
“The northeast United States was the biggest hole in Bank of America’s footprint, and this fills it,” Wayne Bopp, an analyst at Fifth Third Investment Advisors in Cincinnati, told Reuters.
The combined bank would have some 33 million customers and 2.5 million business clients in 35 countries.
The merger marks the end of the large Boston banks that financed much of U.S. industry and business stretching back to 1784 when Fleet, then the Massachusetts Bank, became the first federally chartered bank in the country. Less than a month ago, John Hancock Financial Services, another Boston institution, was bought by Canada’s Manulife Financial Corp.
Since the businesses had little overlap ahead of the merger deal, officials from the companies said they expect the number of jobs in the Boston area to remain about the same. In all, the combined company would employ about 180,000 people and have nearly 5,700 banking offices
“In candor, I didn’t think I would” sell Fleet, said Fleet Chairman and CEO Charles “Chad” Gifford. “It became increasingly clear to us that scale is a tremendous advantage, if properly managed. Bank of America was the one bank that was taking advantage of this scale.”
Under the terms of the agreement, Fleet shareholders will receive 0.5553 Bank of America common share for each of their shares. The merger initially valued Fleet at $45 per share, representing more than a 40 percent premium over Fleet’s closing stock price on Friday.
“The opportunity to merge with Fleet is unique,” Kenneth Lewis, chairman and CEO of Bank of America, said in a statement.
“From the Bank of America perspective, we will have the leading market position in Massachusetts, Rhode Island, Connecticut and New Jersey as well as a powerful retail platform in New York City, upstate New York, New Hampshire and Maine. From a broader perspective, we are building a company that will deliver more financial service capabilities to more Americans than ever before in our nation’s history.”
Lewis will be CEO of the combined company, while Fleet’s Gifford will become chairman. The board of directors will have 12 members from Bank of America and seven from Fleet.
After the acquisition, the companies estimate that the new bank will hold 9.8 percent of the banking deposits in the United States and offer more than 16,500 automated teller machines.
“It’s going to be one of the dominant banks in the U.S. banking industry over the next 25 years,” Gerard Cassidy, an industry analyst with RBC Capital Markets, told the Associated Press.
Alone, the North Carolina-based Bank of America has $737 billion in assets. Before the merger, it was third behind Citigroup, which has more than $1 trillion, and J.P. Morgan Chase & Co., with more than $740 billion, according to the trade publication American Banker.
The companies expect that the merger will close in the first half of 2004.