Barclays and Bank of America have withdrawn from talks to buy Lehman and the US government has refused to offer any financial help. In the absence of a buyer or government aid Lehmans faces insolvency and must file for bankruptcy protection. Following this, in a rather shocking turn of events, Bank of America is now in advanced talks to acquire Merrill Lynch (the next weakest US bank) for up to $45bn.
Wall Street is in turmoil tonight as Merrill Lynch rushed to find shelter in a $35bn-plus takeover by Bank of America and Lehman Brothers appeared to be running out of options to save itself from becoming the biggest victim yet of the credit crunch … BofA’s rapid U-turn, which saw it abandon talks to buy Lehman and turn to Merrill in the space of just a few hours, will throw the spotlight on Morgan Stanley and Goldman Sachs, which could soon become the only two independent investment banks in the US.
Quoted from FTInDepth.
Update: Bank of America bought Merrill Lynch for $50bn which valued ML at $29/share. Now there’s speculation as to which other banks may merge.