Merrill Lynch, the Banker (Acquiring First Republic Bank)

Stock Tickers: MER, FRC

Merrill Lynch is continuing to add to its wealth management operations.  This morning it announced an acquistion of First Republic Bank (FRC-NYSE) for $55.00 per share in cash, or roughly $1.8 Billion in cash and stock (50/50). 

First Republic is another wealth management operation that can be cheaply integrated, and by description it is a bank for high net worth individuals and their businesses.  The acquisition of the San Francisco-based bank is not expected to close until the third quarter.  First Republic has assets of roughly $10.7 Billion; dposits of $7.9 Billion, Loans of $7.6 Billion, and assets under management or in trust of roughly $16.35 Billion.

While this deal looks expensive on the acquisition, the company expects this to be accretive to its earnings by the end of 2008.  It is also a small drop in the bucket when you consider that Merrill Lynch has an $82 Billion market Cap.  This rice represents more than a 40% premium to FRC’s close, and is roughly 20% higher than its 52-week highs and all-time highs.

Jon C. Ogg
January 29, 2007