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Merrill Lynch Buys First Republic Bank

Stephen Harris 30 January 2007

Merrill Lynch Buys First Republic Bank

Merrill Lynch is to buy First Republic Bank for $1.8 billion, pending necessary regulatory approvals and approval by First Republic sharehol...

Merrill Lynch is to buy First Republic Bank for $1.8 billion, pending necessary regulatory approvals and approval by First Republic shareholders. The transaction is expected to be completed in the third quarter of the year. The purchase price equates to 24 times forecast earnings for 2007 and is 3.4 times current book value, although this looks relatively cheap compared to the deal in which Bank of America last November paid 30 times 2006 earnings for Charles Schwab. Founded in 1985, First Republic, a private banking and wealth management firm focused on high net worth individuals and their businesses, will operate as a stand-alone brand within Merrill Lynch and will retain its name, its current management structure, its San Francisco headquarters and its client and community focus, according to a statement. As of 30 September 2006, First Republic had assets under management or administration of $16.4 billion. It specialises in luxury home lending. This is Merrill's largest acquisition in 10 years, for which the US bank is paying a 44 per cent premium. Jim Herbert and Katherine August-deWilde will continue their leadership roles, as chairman and chief executive officer and president and chief operating officer, respectively. Members of the current board of directors of First Republic will serve as the division’s advisory board and will continue to be chaired by the bank’s current chairman, Roger Walther. “We are very pleased that First Republic will join Merrill Lynch as a separately run business that will enable us to enhance the growth of our private client organisation by leveraging First Republic’s very successful business model and strategy,” said Robert McCann, president of Merrill Lynch Global Private Client. “First Republic will enable Merrill Lynch to accelerate its strategic objective of growing its high net worth business. Our goal is to provide First Republic with the resources and support to replicate the firm’s success in key markets across the country and to benefit from its deep banking expertise. “We look forward to supporting First Republic’s further expansion with additional capital and a greater range of investment products, advice and services. While First Republic will operate as a separate division with its own brand identity and strategic goals, we expect our entire private client organisation to benefit from its outstanding history, excellent credit and lending capabilities, and its experienced management team.”

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