Some answers, and questions, on BofA’s offer for Merrill

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Here are some of the details of Bank of America Corp.’s stock-swap deal to buy Merrill Lynch & Co., and some of the issues the surprise offer raises:

--- The bank would exchange 0.8595 shares of its stock for each Merrill share. The offer values Merrill at $29 a share based on BofA’s closing price of $33.74 on Friday.

But if the market takes BofA to the woodshed for rescuing Merrill, the deal value will crumble, of course.

--- BofA says it’s paying 1.8 times Merrill’s stated tangible book value. That’s far better than the fraction of theoretical book that JPMorgan Chase & Co. paid for Bear Stearns Cos. in March, when it bought the firm for $10 a share.

--- Shareholders of both companies will have to approve the deal. Assuming they do, the purchase is expected to close in the first quarter of 2009.

For Merrill shareholders, the offer comes down to this: BofA may be getting Merrill cheap, but without the bid the brokerage’s shares might well have collapsed out of fear that Merrill would follow Lehman Bros. into oblivion.

For BofA shareholders, they can only hope this marriage is happier than the bank’s purchase of discount brokerage Charles Schwab Corp. in 1983. That ended in divorce in 1987, when BofA sold the business back to the firm’s founder.

Merrill is a far different animal than Schwab, but still -- brokerage and commercial banking are two very different cultures. Anyone want to weigh in on whether Citigroup gets its right with Smith Barney, or Wachovia Corp. with its brokerage arm?

--- Merrill would bring to BofA more than 16,000 financial advisers. That would give the bank a total army of 20,000 advisers in wealth management, overseeng $2.5 trillion in client assets in all.

The immediate challenge: BofA will have to assure the top Merrill producers that it will make them happy or keep them happy, so they don’t bolt for a competitor.

--- By joining Merrill’s investment banking business with its own much smaller franchise, BofA says it will become the No. 1 underwriter of high-yield debt worldwide, the third-largest underwriter of stocks and the ninth-largest adviser on mergers.

BofA CEO Ken Lewis obviously has had a major change of heart. It was just a year ago that he told investors, in reference to a lousy third-quarter earnings report: ‘I never say never, but I’ve had all the fun I can stand in investment banking at the moment.’

--- BofA says it expects Merrill to add to the bank’s earnings ‘by 2010.’ Whether that means in 2009 or in 2010 isn’t clear, but I’d guess the latter.

--- By melding the two companies, BofA expects $7 billion in pre-tax expense savings by 2012. The company didn’t address the question of job cuts, but they’re surely coming.

--- Will BofA keep the Merrill Lynch name? The bank didn’t address that in its announcement, either.

--- BofA and Merrill will hold a conference call for investors on Monday at 5 a.m. PDT. For a listen-only connection to the call, dial 877-585-6241. The conference passcode is 79795.