Temasek selling Merrill Lynch at a loss
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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].
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Originally posted by shade343:
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... -
The BOA is attempting to swallow something big and will potentially choke itself. Why 70% premium over its share price, BOA is the greater fool izzit?
If the deal fails to fall through, then Bye bye Merrill? -
Originally posted by redDUST:
er....pls tell us something we don't know...If deal no fall through.. Then Temasek is HG liao.
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"Under terms of the transaction, BofA would exchange 0.8595 shares of its common stock for each Merrill Lynch common share."
What 50 billion? What 1.5 billion profit? My ass, in one day, that 50 billion is down 21% and has become 50*79% which is 39.9 billion and 13.5% of 39.9 billion is 5.33 billion.
Don't forget what the asspots paid.
Originally posted by Veneta:temasek total committment in ML is about 4.9b (dec07) + 3.4b (aug08) = US$8.3b for a 13 to 14% stake. However Temasek did receive a rebate of $2.5b from ML for a capital protection clause negotiated in Dec07, hence Temasek total exposure at ML will be US$5.8b.
If BOA acquire ML for US$49b then the value of Temasek's 14% stake should amount to US$6.86b. Which means, Temasek might potentally make about US$1b profit from their investment in ML.
The asspots are now losing money on their stupid assvestment and will be at the mercy of BofA since they are holding insignificant number of shares in BofA (unlike ML).
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... if the asspots try to talk to BofA (like if BofA decides to sell off ML Singapore properties), BofA will just tell them to f-off...
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Temasick no confidence in its long term investment in Merrill Lynch?
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For the sake of Singaporeans.. I am crossing my fingers , hoping BOA can save Temasek's ass.
In the end.. we still have to rely on the Ang Moh's to bail us out. How embarrassing !!!
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Originally posted by AndrewPKYap:
... if the asspots try to talk to BofA (like if BofA decides to sell off ML Singapore properties), BofA will just tell them to f-off...
Quiet, this is a close door discussion, i suggest we let BOA buy 29 per share, and forget about Marrying lynch..we can take the money, sit on and enjoy with it, afterall, our account is alway undisclose, what you think?? Dun f here and there hor -
Originally posted by jojobeach:
For the sake of Singaporeans.. I am crossing my fingers , hoping BOA can save Temasek's ass.
In the end.. we still have to rely on the Ang Moh's to bail us out. How embarrassing !!!
Oh, not only for the sake of Singaporeans, also for the sake of FTs, foreign workers and angmoh at clark quay. -
Even if ML is making losses every year, it will still be a "going concern" if it lets Temasek takeover the whole company, because Temasek has deep pockets.
Take for instance Global Crossing, since acquisition by ST Telemedia in 2002, it has been losing approximately USD 300 million every year till now, it still hasn't gone belly up. ST Telemedia just keeps pumping money (in the form of new share capital or loans) into it.
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Originally posted by maurizio13:
Even if ML is making losses every year, it will still be a "going concern" if it lets Temasek takeover the whole company, because Temasek has deep pockets.
Take for instance Global Crossing, since acquisition by ST Telemedia in 2002, it has been losing approximately USD 300 million every year till now, it still hasn't gone belly up. ST Telemedia just keeps pumping money (in the form of new share capital or loans) into it.
going concern is a 2 edge knife in accountacy principle. It can be fatal if u rely too much on it -
Roubini: BofA's Lewis 'Totally Overpaid' in 'Reckless' Deal for Merrill
Posted Sep 15, 2008 04:47pm EDT by Aaron Task in Investing, Newsmakers, Recession, BankingBank of America shares tumbled 21% Monday as investors reacted to the firm's blockbuster deal to acquire Merrill Lynch for $50 billion.
"Acquiring one of the premier wealth management, capital markets, and advisory companies is a great opportunity for our shareholders,'' Bank of America CEO Kenneth Lewis said in a statement announcing the deal.
The Merrill transaction is “the strategic deal of a lifetime,” Lewis said at a press conference call Monday, further explaining the rationale. "This creates the company instantly that would have taken a decade to build."
But this year has demonstrated companies built over decades -- even centuries -- can be dismantled in days, if not months. On Monday, many wondered whether Lewis just bit off more than his firm can chew.
Bank of America "totally overpaid" for Merrill Lynch and Lewis was "reckless to buy [Merrill] at this price," says Nouriel Roubini, economic professor at NYU's Stern School and founder of RGE Monitor.
In addition to the unknown "toxic" Level 3 assets on Merrill's books, Roubini notes Bank of America is still absorbing its acquisition of Countrywide from earlier this year - not to mention prior deals for LaSalle Bank in 2007 and MBNA in 2005.
In the accompanying video, Henry and I discuss the Bank of America-Merrill deal with Roubini and NY Post reporter Mark Decambre, who declares there will be "bloodshed on the street" if this deal were to come unwound for any reason.
We also discus what the BofA-Merrill deal means for Citigroup, Goldman Sachs, Morgan Stanley, and other financial institutions like Wachovia and WaMu, which "look like IndyMac," according to Roubini.
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Merrill Faces 'Calamity' If Deal with 'Fragile' Bank of America Collapses
Posted Sep 16, 2008 11:20am EDT by Henry Blodget in Investing, Newsmakers, Recession, BankingFrom ClusterStock, Sept. 16, 2008:
Has anyone seen the language in the Bank of America-Merrill merger agreement? We haven't. But given that Merrill's stock continues to tank -- and take BofA down with it -- we wonder what kinds of "outs" Bank of America has. (Update: After ending virtually flat on Monday, Merrill shares were recently up 17% on Tuesday as Bank of America shares - remember, this is an all-stock deal - rebounded from Monday's shellacking.)
Bank of America wasn't exactly a Rock of Gibraltar before the Merrill deal, and Merrill's toxic assets will now make its own capital situation even more tenuous. And CEO Ken Lewis still has yet to adequately explain why he paid $29 per share for Merrill when he likely could have had it for $15 by waiting a day.
Merrill's stock is now below where it was trading before the BofA deal was announced...and the spread between the stocks is huge. The market, therefore, appears to think there is some risk to the deal, which seems a reasonable conclusion. Needless to say, if the deal falls apart, Merrill is likely toast.
Editor's Note: In the accompanying video, Henry discusses the Bank of America-Merrill deal with Portfolio senior writer Jesse Eisinger, who says it would be a "calamity" for Merrill if the deal falls apart.
Eisinger also notes BofA was "not a particularly strong bank" prior to the Merrill transaction as it struggles to absorb Countrywide. But, he adds, Ken Lewis & Co. are "under enormous pressure" from the Fed to get this deal done, strongly suggesting it was an arranged marriage.
Concerns about the deal falling apart and/or Merrill becoming a millstone for BoA is putting additional downward pressure on financials like Morgan Stanley today -- as if AIG's woes and Goldman's weak earnings weren't enough to worry about.
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not my problem.. i am waiting for the coca cola deal to go through to save my arse now...
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Following is an extract from the New York Times dated 16 Sep 2008:
With Temasek's money placed with different counters, and different counters canibalising into some other weaker counters, does it not look as if Temasek is placing its bets at a roulette table ?
If MM Lee's view is that the investments of Temasek and GIC are for the longer term, one will need to know what is their game plan during the shorter term to rescue their bets on the wrong horses.
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given current financial turmoil, there's no such thing as long term...anyone holding to lehman would have lost it all, aig is now worth as much as a couple of packets of nasi lemark per share...if it wasn't for boa...merril is toast....any idea that temasek is cashing in billions is at best cheer leading reporting by local media, no one is gonna buy...... jim rogers was reported to have met temasek folks and said he didn't think them smart enough to be playing with smart money....this proves that when it comes to the stock market, there's no such thing as cheap or expensive, cheap can get cheaper....
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Originally posted by Atobe:
Following is an extract from the New York Times dated 16 Sep 2008:
With Temasek's money placed with different counters, and different counters canibalising into some other weaker counters, does it not look as if Temasek is placing its bets at a roulette table ?
If MM Lee's view is that the investments of Temasek and GIC are for the longer term, one will need to know what is their game plan during the shorter term to rescue their bets on the wrong horses.
Then what is your ideas?
No investments?Put the money in a cave in Sentosa?
Or inside the bunkers in Bt Gombak?
If LKY ,or the investment team ,tell u their moves,
are there many people will follow?
Tony Tan claimed in 1Q and 2@ 2007,they already cashing out.
Reasons:They sensed somethings wrong.
US house price peak mid 2007
http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,4,0,0,0,0,0.html
Tiered Price Indices
Temasek got capital injections from SG gavaman
total 30 billion,$300 m at the inception,majority in early 1990
and recently 10 b.Now the net assest is S$180 b.
Not bad.u cant gain in every deals.
The only way u will not suffer loss is never invest lah.
But then u still have to take risk of exchange rate!!
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Not don't make investments, but make wise investments, when the ship is sinking, surely a wise person will not move all his gold onboard.
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Originally posted by lionnoisy:
Then what is your ideas?
No investments?Put the money in a cave in Sentosa?
Or inside the bunkers in Bt Gombak?
If LKY ,or the investment team ,tell u their moves,
are there many people will follow?
Tony Tan claimed in 1Q and 2@ 2007,they already cashing out.
Reasons:They sensed somethings wrong.
US house price peak mid 2007
http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,4,0,0,0,0,0.html
Tiered Price Indices
Temasek got capital injections from SG gavaman
total 30 billion,$300 m at the inception,majority in early 1990
and recently 10 b.Now the net assest is S$180 b.
Not bad.u cant gain in every deals.
The only way u will not suffer loss is never invest lah.
But then u still have to take risk of exchange rate!!
Invest in the people. Let the Singapore companies/Singaporeans invest the money. Don't take the money in the first place.... despots... and the assdogs...
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Originally posted by lionnoisy:
Then what is your ideas?
No investments?Put the money in a cave in Sentosa?
Or inside the bunkers in Bt Gombak?
If LKY ,or the investment team ,tell u their moves,
are there many people will follow?
Tony Tan claimed in 1Q and 2@ 2007,they already cashing out.
Reasons:They sensed somethings wrong.
US house price peak mid 2007
http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,4,0,0,0,0,0.html
Tiered Price Indices
Temasek got capital injections from SG gavaman
total 30 billion,$300 m at the inception,majority in early 1990
and recently 10 b.Now the net assest is S$180 b.
Not bad.u cant gain in every deals.
The only way u will not suffer loss is never invest lah.
But then u still have to take risk of exchange rate!!
you, constantly arguing in absolutes is absurb.
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Originally posted by maurizio13:
Not don't make investments, but make wise investments, when the ship is sinking, surely a wise person will not move all his gold onboard.
ya, time to buy bonds, but dun buy jame bond ya -
Originally posted by redDUST:
you, constantly arguing in absolutes is absurb.
How can u insult a top financial conn sultant from our very own Lion City. ? Have some respect ya -
Originally posted by angel7030:
ya, time to buy bonds, but dun buy jame bond ya
Only James Bond here is lionnoisy.
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Originally posted by angel7030:
How can u insult a top financial conn sultant from our very own Lion City. ? Have some respect ya
i only agree with your CONsultant bit ok.....