Temasek May Reap $1.5 Billion Gain From Merrill Lynch
Takeover
By Chen Shiyin
Sept. 15 (Bloomberg) -- Temasek Holdings Pte., the
biggest shareholder of Merrill Lynch
& Co., may reap gains of $1.5 billion from the sale of the
third-biggest U.S. securities firm to Bank of America Corp.
The biggest U.S. consumer bank said today it agreed to buy
Merrill for $50 billion in stock, or $29 a share. The Singapore
sovereign wealth fund paid $5.9 billion since December for about 14
percent of Merrill at an average price of $23.11 a share, based on
Bloomberg calculations from exchange filings.
Bank of America's purchase price is 70 percent more than
Merrill's closing price of $17.05 in New York trading on Sept. 12.
The shares fell 68 percent this
year, after the company reported writedowns and credit losses of
more than $52 billion, the second-most among the world's largest
banks and securities firms, according to data compiled by
Bloomberg.
``It's a huge premium and I expect that there's been some
discussion behind closed doors to come up with a price that is
justifiable and that everyone is happy with, including Temasek,''
said Daphne
Roth, Singapore-based head of equity research in
Asia at ABN Amro Private Bank, which manages about $30 billion of
regional assets.
Bank of America's purchase will help ensure that 94-year- old
Merrill, which employs the largest U.S. brokerage force and owns
about half of New York-based BlackRock Inc., won't become the next
casualty of the global credit crisis. So far, Merrill has suffered
$19 billion in net losses tied to
mortgages.
`Premature'
Temasek, which manages more
than $130 billion, first paid $5 billion between December and
February for about 10 percent of Merrill at $48 a share.
The Singapore company said on July 29 it will invest a further
$900 million in the securities firm, after receiving a $2.5 billion
so-called reset payment for losses from its earlier purchase. The
sum was used to pay for $3.4 billion of Merrill stock at $22.50 a
share, according to filings with the U.S.
Securities and Exchange Commission.
``It is premature for Temasek to comment,'' the Singapore
company said in an e-mailed statement today.
Other key investors who took stakes in the New York-based
brokerage may also join Temasek in reporting gains from their
investments.
Korea Investment Corp., one of at least six investment funds
that bought a combined $6.6 billion of convertible preferred shares
from Merrill in January, said in a statement on July 29 that it
converted 72 million Merrill shares at $27.50 apiece.
Korea Investment's Gains
The sale of Merrill to Bank of America will net the Seoul- based
fund profits of about $108 million, according to Bloomberg
calculations. An official at the sovereign wealth fund declined to
comment today.
Kuwait Investment Authority, a fund that manages the Middle
Eastern emirate's wealth, held a 6 percent stake, or about 73.9
million shares, in Merrill after converting $2 billion of
convertible preferred stock, according to an Aug. 6 regulatory
filing with the Securities and Exchange Commission. An official
couldn't immediately be reached in his office and didn't respond to
a e-mailed query.
Davis Selected Advisors LP, a closely held money manager, and
Mizuho Financial Group Inc.,
Japan's third-largest publicly traded bank by market value, were
among other investors who bought stakes in Merrill.
To contact the reporter on this story: Chen
Shiyin in Singapore at [email protected].
er....pls tell us something we don't know...
