BofA seen in late talks to buy Merrill

NEW YORK (Reuters) - Bank of America (BAC.N) is in advanced talks to acquire Merrill Lynch & Co MER.N for at least $38.25 billion (21.25 billion pounds) in stock, the New York Times said on Sunday, citing people briefed on the negotiations.

The deal comes as bankers and regulators met in New York to figure out whether to rescue Lehman Brothers Holdings Inc, and if so, how. Those talks seemed increasingly likely to result in Lehman's liquidation.

Merrill's talks with Bank of America are "advanced," according to the New York Times, and a transaction valuing Merrill at $25 to $30 per share could be announced as soon as Sunday night, the newspaper said. Merrill shares closed at $17.05 on Friday.

A Merrill Lynch spokeswoman and a Bank of America spokesman did not immediately comment. The Wall Street Journal also reported the talks.

Merrill has been hit hard by the credit crisis and has written down more than $40 billion over the last year.

The bank has also attempted to sell off much of the toxic debt that has been causing the company to haemorrhage capital. Last month, Thain arranged to sell over $30 billion in repackaged debt securities to Dallas-based private equity firm Lone Star Funds.

"I'm surprised that Merrill Lynch would want to sell at this point," said Bill Fitzpatrick, an analyst at Optique Capital in Milwaukee.

"They seem to be taking steps to improve their business. They have sold off a lot of their toxic assets. Merrill seems to be progressing to me."

In spite of these exposures, the bank is seen by some as undervalued, because it has the largest retail brokerage in the world by assets under management and number of brokers. Analysts have valued that business at over $25 billion. Merrill also has about a 45 percent stake in the profitable asset manager BlackRock, (BLK.N) worth more than $10 billion.