Acquire Merrill Lynch? Merge Merrill with another bank?
Even John Thain’s magic is taking time to work at Merrill Lynch, although we really do need to give him a bit more time than he’s had to have a real impact. Nevertheless, he’s been busy breaking up Merrill Lynch, with the sale of its capital finance business to General Electric just before Christmas (see the story in the Deal Journal from The Wall Street Journal on 24 December) which improved Merrill’s capital position by $1.3 billion, the announcement last Monday of the sale of $6.2bn in shares to Singapore’s Temasek and asset manager Davis Selected Advisers, the sale announced today of it’s insurance units to Aegon NV for $1.25 billion (see FT Alphaville and reportedly for $50 million less than discussed in August), and now the reports from Reuters and The Observer that it is talking with Chinese and Middle Eastern sovereign wealth funds about further capital injections.
I’d like to refer readers back to two earlier posts on this blog: ‘No Merger: Just Split up Merrill Lynch‘ from 29 October and ‘More about Breaking Up Merrill Lynch, Citi and Northern Rock‘ from 9 November. It seems to us that further changes, as predicted in those two postings, are still necessary, as an additional $7.5 billion is being sought (see Here is the City from today). It also remains attractive to maximise the value of the Merrill franchise by conducting further sales, as John Thain appears to be contemplating, to focus on the core business of brokerage and investment banking. This does require ‘breaking up’ Merrill Lynch — which is being done in a somewhat orderly fashion, even if the prices achieved for the pieces are lower than would have been achieved earlier (note the sale to Aegon above).
A merger should still not be out of the question, although discussions about a merger with Wachovia were cited as one reason that Stan O’Neal was fired. One thing is certain: When John Thain discusses a merger, he’ll check with the Merrill Lynch board first!
Intelligent Mergers 
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Monday, 29 July 2013