Temasek selling Merrill Lynch at a loss
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Originally posted by eagle:
I still believe that TH's investment in the banks at the inopportune time is not 100% due to investments, but also in international politics and economics. Of course, they might earn more if they wait further... but the banks cannot wait le...
If these banks fall, they might affect Sg much much more than if banks like Freddie fall.
True a not, I wouldn't know, but that's what I think....
It could be, not discounting it, because from the onset Merrill Lynch was a bad buy.Perhaps that's why USA is always a willing party in selling weapons to Singapore.
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Under the terms of the transaction, Bank of America would exchange 0.8595 of its shares for each Merrill Lynch common share.
The transaction has been approved by directors of both companies and is subject to shareholder votes and standard regulatory approvals. It is expected to be finalised in the first quarter of 2009.it is still early time whether it is good news to temasek or not.
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Originally posted by maurizio13:
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.
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Anyone knows how much effect there is on the Sg economy if Bear Sterns and Lehmanns collapsed as compared to ML collapsing?
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Originally posted by eagle:
Anyone knows how much effect there is on the Sg economy if Bear Sterns and Lehmanns collapsed as compared to ML collapsing?
According to our benevolent dictator LKY, he said the US market will have no effect on the Singapore market.I see Gazelle is back after a long hiatus.
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AFP - Monday, September 15
SINGAPORE (AFP) - - State-linked Singapore investment firm Temasek Holdings has not yet decided on what to do with its stake in Merrill Lynch, which is to be bought by Bank of America, sources said.
Temasek Holdings, which holds about 13 to 14 percent in the US investment bank was not available for comment but Dow Jones Newswires, citing unnamed sources, said the Singapore firm was holding a meeting to discuss the matter.
"The investment team is meeting now. Their decision on how to handle the Bank of America shares will depend on how they view the long-term prospects of the bank," the source said. "Temasek always looks at the long term."
The Wall Street Journal reported that Merrill Lynch agreed late Sunday to sell itself to Bank of America for 50 billion dollars in an all-stock deal that values the former Wall Street titan at 29 dollars a share.
Temasek is the single largest investor in Merrill Lynch after making investments totalling 8.3 billion dollars.
Merrill Lynch has been forced to sell itself to seek fresh capital after making huge losses following the meltdown in the subprime, or higher risk, US mortgage market.
--AFP
Long term prospects of the Bank of America? Like how they evaluate the long term prospects of Merrill Lynch?
They might as well toss a coin to make the decision.
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Actually... If ML really had the largest impact on the sg economy of the 3 banks, by investing in ML, TH achieved 3 things at one go. Firstly, international politics. Secondly, helped secure a bit of Sg economy. Third, for super long term investments, it looks viable.
I see Gazelle is back after a long hiatus.
You mean the one that went "Hehehe" when another clone named Bottega insulted fifi?
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Originally posted by eagle:
Actually... If ML really had the largest impact on the sg economy of the 3 banks, by investing in ML, TH achieved 3 things at one go. Firstly, international politics. Secondly, helped secure a bit of Sg economy. Third, for super long term investments, it looks viable.
You mean the one that went "Hehehe" when another clone named Bottega insulted fifi?
I think so... I've been in contact more with ML than Lehmans..
ML seems to be more in the Asian market than Lehmans... but that's for me...
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Originally posted by eagle:
Actually... If ML really had the largest impact on the sg economy of the 3 banks, by investing in ML, TH achieved 3 things at one go. Firstly, international politics. Secondly, helped secure a bit of Sg economy. Third, for super long term investments, it looks viable.
You mean the one that went "Hehehe" when another clone named Bottega insulted fifi?
Yah. That one.
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If Merrill Lynch was really a good investment, Temasek should vote against the sale to Bank of America.
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it just plain luck that either temasek decided to cash in on the profits or hold a stake in BoA.
can we imagine BoA dont buy into ML. will ML collapse like lehmann did?
let not put gold on TH face yet.
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Originally posted by pigsticker:
I think so... I've been in contact more with ML than Lehmans..
ML seems to be more in the Asian market than Lehmans... but that's for me...
That's the main reason why I think it's not luck that TH didn't invest in BS or LH, but invested in ML.
To me, that's practicality at work.
Now, I guess the next one to look out for is AIG... not a bank, but still a financial institution.
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Originally posted by maurizio13:
If Merrill Lynch was really a good investment, Temasek should vote against the sale to Bank of America.
if BoA is assessed to have the ability to support both itself and ML well throughout the whole crisis, then TH might just let it go
that's if my theory is there lor.... :D
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Originally posted by eagle:
if BoA is assessed to have the ability to support both itself and ML well throughout the whole crisis, then TH might just let it go
that's if my theory is there lor.... :D
But some folks here say ML is a good investment, that's why if it's deemed a good investment, all the more they should hold on to it.The takeover is still subject to shareholders approval from both sides. I don't know when that is going to take place, but if it's after the quarterly reporting, then Bank of America shareholders might not be easily swayed by the BoA CEO's words.
It's a share for share transaction, meaning shareholders of ML will give up their shares for an equivalent amount of Bank of America shares. If there are covenants attached to this exchange, Temasek will still be locked in till a future date before they can start selling their shares.
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At 00:17 SG time. BAC share is trading @ 28.19 (-16%) and ML shares are trading at 20.13 (+18.30%).
For .8595 shares, ML shares should be worth 24.23 USD. The price difference of 4.10 shows that this deal is not 100% confirmed or there are other issues which is hindering ML from closing this 4.10 USD gap.
Anyway, the Bloomberg report is outdated and I would estimate that at USD 24.23 ( the full realized value). Temasek would have lost already 4.77 USD on each share .. or the deal is now only worth 42 billion instead of the initial 50 billion. So the stake is almost at break even point. Also, one would have to consider whether BAC will continue to appreciate in value. Do remember they have now absorbed ML's balance sheet and alall the toxic asset and it's going to be a negative effect on BAC's stock price. Eventually, the share price of BAC will fall further ( I won't expect it to start rising anytime soon). So Temasek is still possible to make a loss..
Why would a SWF invest in something so risky? It's really lucky that Temasek didn't lose her pants in this investment, but it would be daft to claim that this is an astute investment. Temasek should be contented with a small loss in ML instead of the original 20-30% loss before being bought out by BAC today. And to say that Temasek made a strategic move to bail out all these banks for the greater good of the global economy is too far fetched.. Temasek has at most 200 billion of assets and can only mobilize at most 20-30% of it. 50-60 billion is not enough to recapitalize even one of the big banks' writedowns and future potential losses..
I would just say it's a bad investment right from the start and it's lucky that Temasek is getting bailed out at the moment by BAC. But to even have to risk a 1% chance of bankruptcy (i.e like Lehman's) is already too risky for a SWF whose main aim is to ensure capital preservation.
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it seem to me in the interview with CNBC, the CEO of BoA are influence to make the decision to buy over ML. if i am shareholders of BoA, i would vote aginst the aquisition of ML. no one know what kind of shit ML consist of.
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Originally posted by ShitSandwich:
At 00:17 SG time. BAC share is trading @ 28.19 (-16%) and ML shares are trading at 20.13 (+18.30%).
For .8595 shares, ML shares should be worth 24.23 USD. The price difference of 4.10 shows that this deal is not 100% confirmed or there are other issues which is hindering ML from closing this 4.10 USD gap.
Anyway, the Bloomberg report is outdated and I would estimate that at USD 24.23 ( the full realized value). Temasek would have lost already 4.77 USD on each share .. or the deal is now only worth 42 billion instead of the initial 50 billion. So the stake is almost at break even point. Also, one would have to consider whether BAC will continue to appreciate in value. Do remember they have now absorbed ML's balance sheet and alall the toxic asset and it's going to be a negative effect on BAC's stock price. Eventually, the share price of BAC will fall further ( I won't expect it to start rising anytime soon). So Temasek is still possible to make a loss..
Why would a SWF invest in something so risky? It's really lucky that Temasek didn't lose her pants in this investment, but it would be daft to claim that this is an astute investment. Temasek should be contented with a small loss in ML instead of the original 20-30% loss before being bought out by BAC today. And to say that Temasek made a strategic move to bail out all these banks for the greater good of the global economy is too far fetched.. Temasek has at most 200 billion of assets and can only mobilize at most 20-30% of it. 50-60 billion is not enough to recapitalize even one of the big banks' writedowns and future potential losses..
I would just say it's a bad investment right from the start and it's lucky that Temasek is getting bailed out at the moment by BAC. But to even have to risk a 1% chance of bankruptcy (i.e like Lehman's) is already too risky for a SWF whose main aim is to ensure capital preservation.
well, Temasek Holdings maybe can't re-cap a big bank's writedowns...
but what it can do is give itself some time to exit itself from its other investments... and re-adjust its portfolio to ride out the coming recession...
if ML was to fail at that point, market pressure would probably have caused Bear Stearns, Lehmans, Fannie Mae, Freddie Mac and god knows who else to go bankrupt much faster than the economy could handle... AIG would probably have gone down much earlier rather than now... And would Citigroup and Barclays have survived the bloodletting ??
btw, AIG failing would probably have a much greater impact than ML, Lehman or Bear Stearns.... my guess is that anyone who has their entire insurance portfolio with AIG would probably find it worthless if AIG were to file for Chapter 11...
the one year respite gave a lot of other banks the chance to consolidate their holdings and to cut back their losses... it gave time for the Fed to organise its resources and organise deals to keep as much business afloat, either thru re-cap or thru merger...
now we have a gradual slide into recession(maybe), but if ML was to fail at that time, the world's economy would probably have fell into recession much faster...
this might not have been Temasek's aim, it could have been pure dumb luck.. but this may have played a part in saving many people's asses...
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Down 21% in one day.... damned despots... take public money and put into their own pockets as reward for losing billions supporting foreigners...
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Originally posted by AndrewPKYap:
Hehehe.........
The current shareholders of Bank of America signalling to the CEO that the takeover of Merrill Lynch was a bad investment decision.
The Dow Jones Industrial average dropped 3.77%, while Bank of America dropped 21.31%.
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Bank of America grabs distressed Wall Street icon Merrill Lynch
NEW YORK (AFP) — Bank of America announced Monday it was buying Merrill Lynch for 50 billion dollars in stock, scooping up the Wall Street icon battered by the housing and credit crisis.
While giving a lifeline to a troubled Wall Street giant, the deal creates the world's largest financial services company, according to the companies.
The announcement came at the close of a tumultuous weekend that saw Wall Street rival Lehman Brothers seek bankruptcy protection, setting off fears of falling dominoes in the global financial system.
Merrill Lynch was seeking a lifeline with its shares tumbling some 78 percent over the past year on fears of snowballing losses from the subprime real estate meltdown and global credit squeeze.
The deal offers Merrill around 29 dollars a share, compared with Friday's closing price of 17.05 dollars.
"This is great news because it gives Merrill shareholders a 12-dollar a share premium and takes out what would have been the next firm to fail," said Peter Cohan of Peter Cohan & Associates.
"I am not sure how Bank of America will make the deal pay off, but now attention focuses on the next domino to fall."
Merrill Lynch shares held steady with a gain of 0.06 percent at 17.06 dollars on the news despite a rout in global stock markets. Bank of America shares slid 21 percent to 26.55 dollars.
"We wonder if Bank of America has appropriately priced Merrill's 80-plus billion dollars of risky asset exposures, particularly considering its relatively thin capital base," said Joe Morford at RBC Capital Markets.
Standard & Poor's cut its credit rating for Bank of America to AA-minus from AA and kept the rating on watch for further possible downgrades.
The actions "reflect the risks of acquiring Merrill Lynch in the present turbulent market environment," said Standard & Poor's credit analyst John Bartko.
"While BofA has a history of successfully integrating bold acquisitions, the purchase of Merrill carries integration risk, particularly since it comes during a period of severe market turmoil. BofA has never integrated an investment bank the size of Merrill," S&P said.
The agency added that Merrill "will introduce more residential housing risk to BofA, notably in the form of its sizable holdings of collateralized debt obligations ... We cannot rule out the possibility of future writedowns."
Bank of America, which earlier this year bought troubled mortgage firm Countrywide Financial, said the acquisition of Merrill creates a financial powerhouse.
"Acquiring one of the premier wealth management, capital markets and advisory companies is a great opportunity for our shareholders," Bank of America chairman and chief executive Ken Lewis said in a statement.
"Together, our companies are more valuable because of the synergies in our businesses."
The news comes six months after a rescue of Bear Stearns, another storied Wall Street group that neared collapse until last-minute deal brokered by US officials gave it to JPMorgan Chase.
John Thain, chairman and CEO of Merrill Lynch, said he looked forward to working with Bank of America to create "what will be the leading financial institution in the world."
Under the terms of the transaction, Bank of America would exchange 0.8595 of its shares for each Merrill Lynch common share.
The transaction has been approved by directors of both companies and is subject to shareholder votes and standard regulatory approvals. It is expected to be finalized in the first quarter of 2009.
Following the acquisition of Merrill Lynch, Bank of America would have the largest brokerage in the world with more than 20,000 advisers and 2.5 trillion dollars in client assets.
It will also give the bank approximately 50 percent ownership in financial firm BlackRock, which has 1.4 trillion dollars in assets under its management.
http://afp.google.com/article/ALeqM5j1afa-pyVg1Zpo2do0EJYqw_jTrg
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Now Merrill Lynch is like the common whore in geylang, willing to fellate any shaft for money.
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I have aheard about Giant Loss Aking Company .May i know the details and the invetsment plans of this Giant Loss Making Company.
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peterheins
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Originally posted by maurizio13:
Now Merrill Lynch is like the common whore in geylang, willing to fellate any shaft for money.
it is an act of desperation for survival. i wouldn't put it the way you did.
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Originally posted by maurizio13:
Hehehe.........
The current shareholders of Bank of America signalling to the CEO that the takeover of Merrill Lynch was a bad investment decision.
The Dow Jones Industrial average dropped 3.77%, while Bank of America dropped 21.31%.
It is bad for the shareholders but it is good for the bank... unlike the despots here that paid for Merrill Lynch with money they robbed from us; Bank of America bought Merrill Lynch with sheets of papers (share certificates).
On paper they bought for 50 billion but in reality they might have bought for 5 billion if they thought that their share price would fall anyway, whether they bought Merrill Lynch or not.
So it is damned despots, robbed us of our money and lose to foreigners supporting foreign banks....