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Funds News

UPDATE 2-Shareholders sue Merrill over proposed BofA deal

(Adds lawsuit filed vs Merrill, details and quotes)

NEW YORK, Sept 15 (Reuters) - Shareholders sued Merrill Lynch & Co Inc MER.N Chief Executive John Thain and the company's board of directors on Monday over the proposed buyout by Bank of America Corp BAC.N, claiming the terms of the deal are unfair.

The lawsuit, filed in New York State Supreme Court on behalf of a shareholder identified as Peter Miller and a class of investors, said the proposed $50 billion sale was “wrong, unfair and harmful to Merrill public stockholders.”

Merrill Lynch spokesman Mark Herr declined comment.

The lawsuit, filed by law firm Murray, Frank & Sailer LLP, described the woes of the subprime mortgage crisis and said Merrill’s attempt to mitigate its losses had failed.

It said Merrill’s public stockholders “have been and will continue to be denied the fair process and arm’s length negotiated terms to which they are entitled in a sale of their company.”

Earlier Monday, another law firm, Wolf Haldenstein Adler Freeman & Herz LLP, said it would file an investor lawsuit against both Merrill and Bank of America, which would become the biggest bank in the United States if the deal is approved by stockholders.

Merrill declined comment, and Bank of America representatives could not be reached immediately to comment.

The lawsuit, filed Monday afternoon as Wall Street swooned through its latest crisis, claimed Thain and the board “are in possession of nonpublic information concerning the financial condition of prospects of Merrill ... which they have not disclosed to Merrill public stockholders.”

It said the defendants “have clear and material conflicts of interest and are acting to better their own interests at the expense of Merrill public shareholders.”

The lawsuit includes requests that the defendants withdraw their consent to the sale of Merrill and that Merrill solicit competing bids.

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 deal at $29 each, a 70 percent premium to Friday’s close. (Reporting by Grant McCool, Edith Honan, Martha Graybow and Elinor Comlay; Editing by Andre Grenon and Jeffrey Benkoe)

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