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Bank Of America Buys FleetBoston

Bank of America Corp. announced an agreement Monday to buy FleetBoston Financial Corp., a deal initially valued at $47 billion that would swallow up the last of the big Boston banks that made the city a financial center from the earliest days of the Republic.

The agreement, if approved by shareholders and regulators, would create the nation's second-biggest banking company. Bank of America, currently No. 3, would have about 33 million customers and 2.5 million business clients in 35 countries.

The deal would also bring Bank of America into New England and eliminate the Fleet name.

"We are now truly the bank of America," said Kenneth D. Lewis, chairman and chief executive of Bank of America.

Fleet's roots here go back centuries to when Boston banks financed the young nation's shipping and textile industries. In 1784, Fleet, then known as the Massachusetts Bank, became the first federally chartered bank in the United States.

The deal comes less than a month after another Boston institution, John Hancock Financial Services, was bought by Canada's Manulife Financial Corp.

FleetBoston and Bank of America executives said that because the companies had so little overlap, they expect the number of jobs in the Boston area to remain about the same.

Still, FleetBoston Chairman and CEO Charles K. Gifford acknowledged there would be some layoffs. FleetBoston has 47,700 employees; Bank of America has 133,000.

Gifford said he did not know how the deal would affect the Fleet Center, where the Boston Celtics and Bruins play. The Fleet name is everywhere in New England, from the arena to a waterfront concert pavilion.

"I'd love for it to be the Bank of America Center," Lewis said Monday.

The acquisition combines banks with assets totaling over $930 billion.

Alone, Bank of America has $737 billion in assets. It is third behind Citigroup, which has more than $1 trillion, and J.P. Morgan Chase & Co., with more than $740 billion, according to the trade publication American Banker.

The combined bank will have about 5,200 branches; Bank of America already has more branches than any other U.S. bank. No. 2 Wells Fargo has about 3,000.

"It's going to be one of the dominant banks in the U.S. banking industry over the next 25 years," said Gerard Cassidy, an industry analyst with RBC Capital Markets.

"It's going to have branches in cities that it didn't have them before, primarily places in the Northeast — New York, Boston, along the northeast coast and New England," said CBS MarketWatch editor Greg Morcroft.

Bank of America, based in Charlotte, N.C., will pay $45 a share for Fleet, or about $13 more than FleetBoston's closing price on Friday.

In trading Monday on the New York Stock Exchange, FleetBoston shares climbed to $39.20, while Bank of America shares fell to $73.57, down $8.29, or 10 percent. That reduced the value of the offer to $42.9 billion.

Lewis will be chief executive of the merged company, to be headquartered in Charlotte. Gifford will be chairman of the board.

The deal, already approved by both boards of directors, is expected to be completed in the first half of 2004. Bank of America said it expects the merger to save $1.1 billion.

Analyst John McCune of SNL Financial Corp. said the deal could also signal a new round of bank mergers with large regional banks joining forces with big financial services as the only way to compete.

"No other single bank has the same combined coverage this bank does right now," McCune said.