Merrill Lynch & Co., the investment banker that operates the nation's biggest brokerage, said Monday it will buy San Francisco-based wealth manager First Republic Bank for $1.8 billion in cash and stock.
With of assets $10.7 billion, First Republic provides investment services including trust banking and luxury home lending through 43 offices in the U.S. Because it caters to the wealthy, First Republic attracts hefty deposits and has few credit problems, the companies said.
Merrill Lynch offered $55 per share for First Republic, split evenly into cash and stock. The offer represents a 43.6 percent premium to First Republic's Friday closing price on the New York Stock Exchange.
First Republic would become a stand-alone division within Merrill Lynch Bank & Trust Co., maintaining First Republic's name and San Francisco headquarters. Merrill Lynch expects to close the deal in the third quarter, pending shareholder and regulatory approvals.
Jim Herbert and Katherine August-deWilde will continue as chairman and CEO and president and COO, respectively. Current directors will serve as the division's advisory board, which will continue to be led by the bank's current chairman, Roger Walther.
Robert J. McCann, president of Merrill Lynch's private client business, said First Republic will expand Merrill Lynch's high-net worth banking services.
At Sept. 30, First Republic had assets of $10.7 billion, and held $7.9 billion in deposits and $7.6 billion in outstanding loans. Net income after paying preferred dividends totaled $46.3 million for the nine months.
Merrill Lynch, which earned $5.12 billion in 2005, said it would repurchase on the open market the number of shares issued to complete this deal. The investment bank expects the acquisition to add modestly to earnings by the end of 2008.
Shares of First Republic soared $15.70, or 41 percent, to $54 in premarket trading. The stock has ranged between $34.71 and $46.02 over the past year.