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 Several experts think that Bank of America Corp. (NYSE:BAC) could eventually take Merrill Lynch & Co. public. For real.In a CNBC interview Friday, Bill Smith, president, CEO and senior portfolio manager at SAM Advisors, suggested that BofA may IPO Merrill Lynch down the road. That prediction seemed a bit odd considering that BofA is spending billions of dollars integrating the firm (and seeing lots of talent flee) while stanching the bleeding from Merrill's load of toxic assets. Wasn't that what part of BofA's second bailout infusion was for? Granted, Smith's argument that financial supermarkets are a thing of the past may be understandable, if still arguable (J.P. Morgan Chase & Co. [NYSE:JPM], UBS, Credit Suisse Group, Barclays plc [NYSE:BCS] and Deutsche Bank AG [NYSE:DB] remain supermarkets of sorts), and Bank of America's commercial bank culture may clash with Merrill's investment banking culture. As Smith explained to CNBC: "Once Bank of America gets through this credit crisis, in two or three years, there's a very good likelihood that you're going to see an IPO of Merrill Lynch again and there's a possibility that Merrill Lynch can be a publicly traded company again." Getzler Henrich's Dino Mauricio, who leads the firm's M&A Integration practice, doesn't think Smith's argument is so far-fetched. Both companies are already seeing issues integrating the cultures and -- even though first-quarter earnings showed profit of $4.2 billion, up from $1.2 billion during the same period in 2008 -- more integration woes could unfold. Mauricio said: "Bank of America has done a lot of integration work to get the organizations aligned and leveraging Merrill's global scale in retail brokerage and wealth management. As of today the banks have yet to merge their broker-dealer operations which includes the investment banking, capital markets and advisory businesses. Given the recent capital struggles, prominent banker defections and leadership conflicts, they may choose to give up integrating the businesses." So why would Bank of America choose to give up on Merill and spin it off instead? Simply because it could be potentially more profitable to shareholders in the long run. Mauricio went on to say: "As a spinoff it allows shareholders to maximize the value to the asset. But this would at least two years from now. The market doesn't value Merrill beyond its standalone value. The merger makes sense for now. You have a set of banks whose quality of assets are under intense scrutiny. Merrill's capital markets, M&A, and the brokerage businesses are handcuffed right now due to the down economy, but as the economy improves so those businesses will flourish again." Mauricio also said that changes to the investment banking model and the commercial bank landscape could factor in. "As investment banks are forced to become more conservative in investment and trading activities, access to BofA's huge asset base becomes less of a competitive advantage for Merrill in the long run," he said. - Maria Woehr Follow me on twitter @newsgirlmw Also see: What assets will BofA divest?
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It seems a good move in the era of crisis this step would save the company alot.