FERC has been asked to approve on an expedited basis Bank of America's proposed acquisition of Merrill Lynch & Co.'s energy trading and marketing arm as part of the planned $50 billion merger of the two banks.
The banks called on the Federal Energy Regulatory Commission (FERC) to swiftly review and approve the purchase of Merrill Lynch Global Commodities Inc. (MLCI) by Nov. 17 or sooner. Bank of America is hoping to close its all-stock buyout of investment banker Merrill Lynch by the first quarter of 2009. The deal has been cleared by the boards of directors of both companies and is subject to the approval of shareholders of each company.
"Expedited review of this application by the Commission is warranted because the parties need to close the transaction in a very difficult environment for the U.S. and international credit and capital markets," Bank of America and Merrill Lynch said. They noted that they "negotiated the terms of the transaction over the course of a single weekend."
Bank of America rescued Merrill Lynch from an uncertain financial future in mid-September as competing global investment banker Lehman Brothers filed for Chapter 11 bankruptcy, sparking much of the ongoing market turmoil (see NGI, Sept. 22).
Bank of America's energy trading subsidiary is Bank of America NA (BANA). Both BANA and MLCI trade and market electricity; neither owns nor controls generation and transmission assets. BANA and MLCI also are involved in the trading and marketing of natural gas, as well as other energy commodities.
"It is a possibility that on or following consummation of the transaction, BANA and MLCI will begin to integrate their respective power marketing businesses to the extent permissible for [the] banks. The integration may include, among other things, the sharing of personnel, the coordination of market information and the common management of risk," the banks told FERC [EC09-7]. FERC authorization is required to acquire power marketing operations under the Federal Power Act, but no such approval is needed to purchase gas trading and marketing businesses.
"At some point applicants may fully integrate their power marketing businesses by transferring existing wholesale power contracts, personnel and related books and records from BANA to MLCI, or vice versa, again to the extent permissible by national banks. " If this occurs, either BANA or MLCI will terminate its existing market-based rate authorization, the banks said.
"Applicants believe that existing blanket authorizations would permit all such activities as part of an internal corporate integration without further approval from the Commission. If determined by the Commission to be necessary, however, applicants hereby request authorization of a full integration of the jurisdictional activities of BANA and MLCI as part of this application."
The banks argued that the combination of the energy marketing activities would not raise either horizontal or vertical market power issues, adversely affect rates or regulation and would not raise improper cross-subsidization concerns.
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