A Bank of America bid for Barclays has revived, according to news reports. Analysts at Merrill Lynch are reported to have circulated a note to clients which says that “Bank of America has previously indicated that the next phase of its expansion is to become a leading global commercial and investment bank. In order to achieve that goal, we believe Bank of America is very interested in acquiring Barclays.” Barclays shares, already under upward pressure from bid speculation, rose again in London this morning.
The recent resignation of Bank of America CFO Al de Molina is seen by the analysts as clearing the decks for a bid.
A bid by Bank of America for Barclays – the third largest British bank, measured by market capitalization – would be the biggest financial-services acquisition ever attempted, but Bank of America is believed to see Barclays as an attractive choice as it builds up its treasury, asset management and fixed-income trading and underwriting activities. It would also give Bank of America a substantial UK retail and commercial baning business, and the Barclaycard credit card franchise. “We think Barclays is the perfect fit for Bank of America, given our understanding of Bank of America’s international aspirations,” the Merrill Lynch note to clients is reported to have said. The note was written by Edward Najarian and Brian Bedell in New York and John-Paul Crutchley in London.
Bank of America is large – it is the second largest bank in the world by market capitalization – but the price of the deal wil depend on the ability of Bank of America to make savings. It is thought to be aiming at savings of up to 1.5 billion (US$3 billion) from the acquisition, allowing it to pay a 25-30% premium the closing price of Barcalys shares last night 7.07). A 30% premium would value Barclays at around $117.6 billion, or roughly half of Bank of America’s $235.7 billion market capitalization. A takeover would see Bank of America outstrip Citigroup to become the biggest bank in the world.