Merrill-BofA: Doubts Surface

Is Bank of America really going to buy Merrill Lynch? The stock market’s saying that it has its doubts.

With stock prices having settled down a little this morning, BAC is trading at $29.36 per share (down 13%), while MER is at $21.84 (up 28%). But here’s the thing: Bank of America is offering 0.8595 of its own shares for each share of Merrill — which would value MER not at $21.84 but rather at $25.23 — a difference of more than 15%. If the deal was a sure thing, you could just buy MER, short BAC, and make a tidy risk-free return. Not interested? Really? Me neither, frankly.

Update, 3:30pm: BAC’s now at $27.33 (implying a $23.49 purchase price), while MER is at $19.24. Which puts the premium at 22%.

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