Merrill Lynch Buys British Stockbroker

Escalating the takeover binge in the British securities industry, Merrill Lynch & Co. Inc. agreed Friday to pay $842 million for Smith New Court PLC in a deal that creates the largest global stockbroker.

Merrill, which prevailed after a two-week bidding war, becomes the first big U.S. brokerage to join a feeding frenzy dominated until now by continental Europe banks.

Merrill’s price for Britain’s No. 1 stockbroker firm ups the ante for a dwindling British industry pool of independent brokerages. Britain is seen as a launching pad for expansion into markets not yet dominated by major world investment banks.

For the global leadership in stocks, Merrill Lynch is paying a steep 2.4 times Smith New Court’s book value.

“I think they are overpaying. They can afford it,” said Perrin Long, an industry analyst with Brown Brothers Harriman & Co. in New York.