Bank of America takeover to end independent Merrill

By Jonathan Stempel and Elinor Comlay

NEW YORK (Reuters) - Bank of America Corp's (BAC.N: Quote) $50 billion acquisition of Merrill Lynch & Co Inc MER.N would mark the end of a storied name in American finance, but create the nation's biggest bank by far.

Investors soured on the all-stock merger, worried it magnified Bank on America's exposure to risky debt in a fragile economy -- less than three months after it bought mortgage giant Countrywide Financial Corp.

Bank of America shares closed down 21.3 percent on Monday, wiping out about $33 billion of market value, while Merrill ended barely changed at $17.06, despite being valued in the merger at $29 each, a 70 percent premium to Friday's close.

Merrill's stock price might indicate skepticism that the merger will go through. The deal requires approval by both banks' shareholders because of the large amount of stock involved.

The purchase would end the 94-year independence of Merrill, Wall Street's third-largest bank, and pair it with a banking behemoth that has announced more than $150 billion of acquisitions in the last five years. Bank of America would pass Citigroup Inc (C.N: Quote), the largest bank by assets, in size.

"There's some concern they might have bit more than they could chew," said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co in San Francisco."

Monday's merger deal came together in less than two days -- after Merrill Chief Executive John Thain called Kenneth Lewis, his counterpart at Bank of America, to propose a combination.

This came as Thain, other top industry executives and officials from the U.S. Federal Reserve had huddled in emergency meetings in downtown Manhattan over the weekend to mull the fate of Lehman Brothers Holdings Inc LEH.N.