Sept. 14 (Bloomberg) -- Bank of America Corp. agreed to buy Merrill Lynch & Co. in a deal that values the 94-year-old firm at about $44 billion after its shares plummeted in the past week, two people familiar with the deal said.

The companies' boards approved the merger agreement this evening, according to the people, who declined to be identified because the deliberations were private. Payment will be in Bank of America stock, one of them said. The $29-a-share purchase price, while 70 percent below the stock's January 2006 record, is 70 percent more than the closing price of $17.05 in New York trading on Sept. 12.

Merrill, the third-biggest U.S. securities firm by market value, agreed to the sale after a weekend of talks at the Federal Reserve Bank of New York about the fate of smaller rival Lehman Brothers Holdings Inc.

By Sunday evening in New York, Lehman was preparing to file for bankruptcy, wounded by a credit crisis that has forced the world's biggest banks to book more than $510 billion of writedowns. Merrill's sale, in the wake of Bear Stearns Cos.' collapse in March, may leave Goldman Sachs Group Inc. and Morgan Stanley as the only survivors among the five biggest independent investment banks on Wall Street.

``A merger between Merrill and Bank of America is a good idea,'' said Richard Bove, an analyst at Ladenberg Thalmann & Co. in Lutz, Florida. ``If Lehman fails, the next bank to be attacked would be Merrill. They are attempting to forestall that attack by linking with Bank of America.''

Biggest Brokerage

Spokespeople for Bank of America and Merrill, which employs about 16,690 financial advisers, the largest U.S. brokerage force, declined to comment.

Bank of America, led by Chief Executive Officer Kenneth Lewis, 61, has maintained its AA credit rating as other U.S. financial institutions, including Merrill, faced downgrades. Merrill's stock plunged 36 percent last week after Oppenheimer & Co. analyst Meredith Whitney predicted a $6.87 billion third- quarter loss and investors speculated that New York-based Merrill may sink along with Lehman.

Bank of America, based in Charlotte, has rallied since reaching a low on July 15.

Merrill CEO John Thain, 53, was among the Wall Street chiefs who gathered the past three days for a series of meetings at the Federal Reserve Bank of New York to discuss a resolution for Lehman. U.S. Treasury Secretary Henry Paulson and New York Fed President Timothy Geithner summoned the executives to the weekend meetings.

Bank of America's Rally

Representatives of Bank of America skipped the initial sessions because the company was bidding for Lehman.

Bank of America has rallied 82 percent since reaching a low on July 15. On Sept. 12, the shares climbed 68 cents, or 2.1 percent, to $33.74 in New York Stock Exchange composite trading.

Merrill shares fell 12 percent on Sept. 12 to $17.05, the first close below $20 a share in a decade.

To contact the reporters on this story: Bradley Keoun in New York at bkeoun@bloomberg.net; Jonathan Keehner in New York at jkeehner@bloomberg.net

Last Updated: September 14, 2008 23:53 EDT