I guess from the start of the investment when Temasek purchase
the shares for USD48 (when it was then trading at USD52), they
forsaw that the Merrill Lynch's share price will drop to USD17,
they also forsaw that Merrill Lynch will need to raise more money
through share capital instead of debt like bonds, they also forsaw
that Bank of America will take over the company at premium way
above the USD 17 current market price.
I didn't know Temasek is into fortune telling? 
Let's face it, this Bank of America deal is just a stroke of
luck, it might fall through.
1) The offer made by Bank of America is a share for share offer,
no cash, there might be covenants attached to it, like a vesting
period before you can trade it. If so, then you are still locked in
on the US financial crisis.
2) The offer made by the director of Bank of America is still
subject to shareholder approval, which may or may not go
through.
3) Bank of America believes that there is synergy resulting from
the takeover.
4) Why do you think Merrill Lynch's John Thian was so eager to
close the deal at the expense of losing his castle? There might be
possibility of greater financial distress with the company this
coming 1-2 quaters. There is always information asymmetry in cases
such as this, one who is an insider (John Thian) who has more
information regarding his company than Bank of America. If the
takeover goes through, only 3 directors from Merrill Lynch will be
absorb into Bank of America, the rest is made redundant. Anybody
would know that John Thian will be in the party of 3 directors.
5) If Bank of America waits another 2 quarters, they could
acquire Merrill Lynch at basement prices. A company faced with
liquidity issues will see share prices drop like a brick.
I read that Temasek deal with ML was alot better than other
SWFs in ML. Arent they the only SWF that has negotiated the
capital protection clause which enable them to reduce their average
price to from about $40 to $21 per share? This cant be
luck right?
Bear Sterns and Lehmans Bros were also looking for SWF
funding before they collapse, do you think it is luck that Temasek
and GIC didnt invest in them?
The fact that ML is bought by BoA it only shows that ML is a
company that is worth buying and not left to collapse.
