M&A Deals of the Year
Introduction   Apple and partners-Nortel   Google and Motorola Mobility   Access Industries -Warner Music   Cumulus Media-Citadel   Comcast-NBC Universal   H&R Block-TaxAct   Caterpillar-Bucyrus   Ares and CPPIB-99 Cents Only Stores   Grupo Bimbo-Sara Lee baking assets   BHP Billiton-Petrohawk   Peabody Energy-Macarthur Coal   Selling off Bank of America   Dish Network-Blockbuster   Amgen-BioVex   KKR et al.-Samson Investment   Pearson-Connections Education   Alleghany-Transatlantic   Breaking up Dexia

Bank of America Corp. got a little smaller in 2011 as it unloaded credit card, private equity and insurance company assets and sold massive equity holdings amid pressure to raise capital in the face of future losses and litigation. The bank also got an expensive vote of confidence from Warren Buffett via a $5 billion preferred share and warrant purchase with a hefty dividend.

All told, BofA sold more than $30 billion in assets last year, relying mostly on in-house dealmakers for financial advice. While some analysts consider the sales an accomplishment, given BofA's pressured situation, others argue that they are not enough to cover the bleeding. Indeed, BofA shares ended 2011 down 60% at $5.56. But from a dealmaking standpoint, the divestiture of multiple large assets -- many at full prices -- by a troubled seller at a time when big deals were scarce is a noteworthy achievement.

BofA commenced its divestiture strategy in 2010 under new president and CEO Brian Moynihan. Large 2010 sales included the $4.4 billion secondary offering of preferred and common shares in Brazil's Itaú Unibanco Holding SA; a 24.9% stake in Banco Santander SA's Mexican unit back to the parent for about $2.5 billion; and 51 million BlackRock Inc. shares to the public and Mizuho Financial Group Inc. for $8.3 billion. BofA also completed the $1 billion sale of asset manager Columbia Management to Ameriprise Financial Inc.

BofA stepped on the gas in 2011. In February, it sold Balboa Insurance Group Inc. to QBE Insurance Group Ltd. for about $700 million. In April, it unloaded its Asian private equity portfolio, worth a reported $400 million, to Hong Kong's NewQuest Capital Partners, and in May, it sold its remaining BlackRock stake for about $2.55 billion.

August was a very busy month. BofA sold its Spanish credit card business to Apollo Capital Management Inc. for an undisclosed price and its Canadian credit card business, worth about $8.6 billion, to TD Financial Group. On Aug. 29, BofA announced the sale of 13.1 billion China Construction Bank Corp. shares, roughly half of BofA's 10% stake, to private investors for about $8.3 billion.

"Bank of America needed to get risk-weighted assets down and capital up -- the CCB trade did both," says a financial institutions group, or FIG, banker.

The CCB sale had a strong capital impact because under Basel III, a bank's Tier 1 capital is reduced if it has a financial services company holding of 10% or more. BofA also unloaded the stake at an opportune time. China's growth outlook had just begun to slow when BofA executed the sale, says Sterne Agee Group Inc. analyst Todd Hagerman. The financial company capital deduction also applied to BlackRock, a "very valuable asset" for which Bofa got "full value," he says.

The August divestitures alone helped BofA raise its tangible common equity ratio from 5.75% in the second quarter to 6.13% in the third. (BofA is aiming for a 6.75% to 7% TCE ratio by 2013.) Also in August, Buffett bought 50,000 preferred shares of BofA with a 6% annual dividend and warrants for 700 million shares at a $7.14 exercise price as rumors swirled that the bank would have to raise $40 billion to $200 billion to cover mortgage-related losses. Though the sale boosted BofA's shares by 9.5%, it did not provide any core capital, according to the FIG banker. It was "an act of desperation rather than an act of good corporate governance," he asserts.

The asset sales continued in September when BofA's private equity arm, BAML Capital Partners, sold its 15.6% stake in hospital operator HCA Holdings Inc. via a $1.5 billion share buyback. In November, BAML agreed to sell Pizza Hut Inc. franchisee NPC International Inc. to private equity firm Olympus Partners for a reported $755 million. Also in November, BofA sold an additional 10.4 billion CCB shares for $6.6 billion, leaving it with 1%.

The selling is not over. The latest assets tagged for sale are BofA's U.K. and Ireland credit card portfolio. The bank will also continue to wind down the BAML portfolio, which as of mid-2011 was worth about $6 billion. BofA's mortgage-servicing rights, the rights to collect on mortgages it originated, are also for sale. BofA has sold about $452 million in MSRs as of Sept. 30, and the value of its remaining MSRs is about $7.9 billion.

But as quickly as BofA raises capital, it can erode.

"Every time you turn around, there is another lawsuit, settlement or charge causing a one-time loss," says the FIG banker.