Deal Would Form Biggest Brokerage : Securities: Merger of Merrill Lynch and Smith New Court would be one of the largest in the industry.

Merrill Lynch & Co. will buy Smith New Court, a large British securities firm, for about $842 million in cash, in a deal that would create the world’s largest stockbroker, the companies said Friday.

Merrill, already the largest securities firm in the United States, bested Germany’s Commerzbank in bidding for Smith New Court.

The companies said the combined firm would have the largest stock research team in the world, with about 370 analysts. It would also be the leading underwriter of new stock issues and the largest trader of U.S. and British stocks and U.S. stocks of foreign companies based in Europe, Asia and Latin America.

The purchase, subject to approval by regulators and Smith shareholders, would represent one of the biggest deals in an ongoing consolidation of the global securities industry.

As traders and investors have demanded the ability to easily buy and sell securities from countries around the world, many firms have sought expansion in regions where they lack strength.

Merrill executives said they see Smith New Court as a jumping-off point for expansion in South Africa, Malaysia, Thailand and other countries.

“By combining Merrill Lynch’s global resources with Smith New Court’s experience and relationships in non-U.S. equity markets, we expect to increase our business significantly around the world,” Merrill Lynch Chairman Daniel Tully said.

Smith New Court directors have agreed to Merrill’s terms and will recommend the offer to shareholders, the companies said. The Anglo-French securities firm Rothschild Group has agreed to accept the offer for its 25.9% stake in Smith New Court. The price is higher than many analysts had expected, perhaps reflecting the competition from other suitors.

Merrill employs 2,000 people in Britain and Smith has a staff of 950 in London, leading to speculation that a merger could eliminate a significant number of jobs. Merrill executives played down that possibility, saying there won’t be many cuts because the deal is aimed at expansion, not consolidation.