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Merrill to receive US$6.2b investment

Merrill to receive US$6.2b investment

U.S. investment bank and brokerage Merrill Lynch said yesterday it had raised a potential US$6.2 billion, mostly from a Singapore state-owned investment fund that will buy a US$4.4 billion stake in the troubled bank.
Merrill, which has seen its finances ravaged by a persistent U.S. housing slump, said Singapore's Temasek Holdings Pte. Ltd., had committed to a US$4.4 billion shareholding which it may raise by an additional US$600 million.
The U.S. bank's new chief executive officer, John Thain, said the cash injections would help Merrill shore up its stressed balance sheet.
Merrill also announced that Davis Selected Advisors, a U.S. investment firm, was purchasing a US$1.2-billion stake in the bank.
"One of my first priorities at Merrill Lynch was to strengthen the firm's balance sheet, and today we have made great progress towards that by bolstering our capital position through these investments," Thain said.
Merrill ousted its former CEO Stan O'Neal in late October after revealing nearly eight billion dollars in writeoffs, mainly related to ailing mortgage investments.
"John Thain, the former CEO of NYSE Euronext, stepped in to right the ship and he has wasted little time in strengthening the firm's balance sheet," Patrick O'Hare, a market analyst at Briefing.com, said of Merrill's news.
Analysts expect the bank to unveil fresh losses when it releases its fourth quarter earnings.
Merrill said Temasek's stake would remain under 10 percent and that both the Singapore fund and Davis Selected Advisors would have no control over the bank's management or operations.
Thain said the Temasek deal would enable the bank to boost its business in Singapore, China and India.
The deal is the latest in which a cash-rich foreign state-controlled fund has bought a big shareholding in a U.S. bank troubled by vast mortgage-related losses.
Morgan Stanley announced last Wednesday that the Beijing-controlled China Investment Corporation had obtained a US$5 billion stake in the firm.
That deal enables CIC to gain up to a 9.9 percent shareholding in Morgan Stanley.
It followed fast on the heels of a similar transaction last month which saw the Abu Dhabi Investment Authority of the United Arab Emirates become one of Citigroup's biggest shareholders through a US$7.5 billion investment.
Both Morgan Stanley and Citigroup, like Merrill, have seen their finances stretched by mortgage investment losses tied to the sharp downturn in the U.S. property market.


Updated : 2021-04-24 01:05 GMT+08:00