Bank of America Corp., Charlotte, N.C., said it planned to acquire FleetBoston Financial Corp., Boston, for $47 billion in stock, or about $45 per FleetBoston share. After the announcement, a decline in BoAs stock price brought the value of the deal down to about $43 billion.
Both companies have a presence in the bank-insurance market. BoA is one of the companies that fought to tear down the legal barriers that once kept banks out of insurance sales and underwriting.
BoAs Bank of America N.A. subsidiary generated about $101 million in insurance commission income and $686 million in revenue from mutual fund and annuity sales in 2002, according to the Bank Insurance Market Research Group, Mamaroneck, N.Y. The firms Singers Bank Insurance and Investment Data report shows that Bank of America brought in about $300 in insurance commissions in 2002 for every $1 million in deposits.
FleetBostons Fleet N.A. Bank unit generated $58 million in insurance commission income and $405 million in revenue from mutual fund and annuity sales in 2002. Singers Bank Insurance and Investment Data report shows Fleet brought in about $500 in insurance commissions for every $1 million in deposits. FleetBoston also sells insurance through its Quick & Reilly securities brokerage unit.
FleetBoston has $196 billion in assets. Bank of America, which has $738 billion in assets, would make Charles Gifford, current chairman of FleetBoston, chairman of the combined company, but the headquarters of the combined company would be in Charlotte, BoA says.
Kenneth Lewis, BoA chairman, would be the CEO of the combined company, and 12 of the board members of the new company would come from Bank of America. Seven of the board members would come from FleetBoston.
Wealth management, premier banking and some other businesses would be based in Boston, rather than in Charlotte.
The combined company would have $934 billion in assets, according to SNL Financial L.P., Charlottesville, Va. Only Citigroup Inc., New York, with $1.2 billion in assets, would be bigger, SNL says.
Lewis says his company is making the acquisition to gain a strong position in New York City and a leading position in Massachusetts, Rhode Island, Connecticut and New Jersey. The new company would have 33 million consumer relationships, he says.
The combined company “will have 9.8% of the banking deposits in the United States and have the first, second or third largest market shares in 21 of the 29 states in its retail footprint, including significant market shares in 21 of the nations 30 largest metropolitan areas,” BoA says.
Completion of the deal is subject to approval by antitrust regulators and shareholders as well as state and federal banking regulators.
Reproduced from National Underwriter Life & Health/Financial Services Edition, October 31, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.