Analysts think the deal may trigger copycat mergers.

BOSTON (AP) – In a bold and pricey bid to live up to its name, Bank of America Corp. said Monday it would buy FleetBoston Financial Corp. in a deal initially valued at $47 billion to create a banking giant stretching from California through the South to New England.

The new company will have about 5,700 branches – nearly twice as many as nearest rival Wells Fargo – and a combined $930 billion in assets, second only to Citigroup. The acquisition also will give Charlotte, N.C.-based Bank of America a truly national presence by expanding its footprint into the Northeast.

Analysts said the deal could also trigger a wave of copycat mergers as financial services giants scramble keep up by matching off with big regional banks. The merger is among the biggest ever in the banking sector; Bank of America merged with NationsBank in 1998 in a deal initially valued at $59.3 billion and completed at $43 billion.

“There’s speculation around here, is it going to start a new wave of big guys buying almost-as-big guys?” said John McCune, manager of banking research at SNL Financial Corp. “With this merger, Bank of America has essentially made itself the bank of America. The other question is who else could do that. No other single bank has the same combined coverage this bank does right now.”

The announcement was a blow to Boston’s status as a financial center. Fleet’s roots here go back centuries to when Boston banks financed the young nation’s shipping and textile industries. In 1784, then known as the Massachusetts Bank, it became the first federally chartered bank in the United States.

The deal, which will eliminate the Fleet name, comes less than a month after the city lost another institution when John Hancock Financial Services was bought by Canada’s Manulife Financial Corp.

However, FleetBoston and Bank of America executives said, because the companies had so little overlap, they expected the number of jobs in the Boston area to remain about the same. FleetBoston has 47,700 total employees; Bank of America has 133,000.

Local shareholders could also console themselves with the $45 per share Bank of America offered for Fleet, a 41 percent premium on Friday’s closing price.

In trading Monday on the New York Stock Exchange, FleetBoston shares climbed to $39.20, up $7.40, or 23 percent, while Bank of America shares fell to $73.57, down $8.29, or 10 percent.

That reduced the value of Fleet’s offer to $42.9 billion.

The combined company would have annualized revenue of $27.9 billion and be No. 1 in the United States with 33 million retail customers, a 9.8 percent market share and 16,551 ATMs, the two companies said.

“The truly compelling argument for this merger is the long-term vision for a truly national bank,” said Bank of America Chairman and Chief Executive Kenneth D. Lewis, who will serve as CEO of the combined company. FleetBoston CEO Chad Gifford will serve as chairman.

The Fleet name will disappear not only from 1,460 branches in the Northeast, but also most likely from Boston’s FleetCenter, home of the NBA Celtics and NHL Bruins.

“I’d love for it to be the Bank of America Center,” Lewis said at a Boston news conference.

Both executives said the two companies’ charitable activities would, if anything, increase.

Gerard Cassidy, an analyst with RBC Capital Markets, said that after years in which the company was the target of merger rumors, Gifford finally got the right price.

“I think Fleet always had a price in its head which was $45 per share, and Bank of America agreed to pay that price,” Cassidy said.

Lewis and Gifford said they began speaking last year. But FleetBoston was beset by what Gifford called at the time “a perfect storm” of difficulties – including problems with its venture capital, investment banking and Latin American operations – that it only recently appears to have cleaned up. Earlier this month it reported strong earnings that, for the first time in several quarters, didn’t include charge-offs.

The 1999 merger of Fleet Bank and Bank of Boston that created FleetBoston was beset by problems with customer satisfaction, but Gifford said that wouldn’t be a problem this time.

During that merger, Gifford said, customers were forced to adapt to inferior services to which they were not accustomed.

“There will always be hiccups when you (merge), that’s inevitable,” Gifford said. “But this time, when that journey, migration, is finished our customers are going to have a terrific suite of products.”

There were, however, indications they may face problems from regulators. Connecticut Attorney General Richard Blumenthal and Massachusetts Secretary of State William Galvin each promised to keep a close on eye on it.

“This mega merger raises very profound questions that require strong action to investigate and protect consumers,” Blumenthal said, calling the merger “a dangerous step towards oligopolistic dominance, threatening competition in the banking industry.”

Cassidy said further consolidation was indeed likely.

“In the end we’ll have half a dozen banks controlling more than 80 percent of all the (market),” he said.

The deal requires the approval of shareholders, as well as regulators. The closing is expected in the first half of 2004.

Bank of America has $737 billion in assets and $409 billion in deposits. Fleet, based in Boston, has assets of about $196 billion.

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On the Web:

Bank of America: http://www.bankofamerica.com

Fleet: http://www.fleet.com

AP-ES-10-27-03 1736EST