embattled over the prospect of billions of dollars in losses from the US sub-prime
mortgage crisis may have led Merrill Lynch chairman and chief executive E Stanley
O''Neal to consider a merger with a large bank. But, say sources in Merrill, the
move could cost the CEO his job.
to sources close to the beleaguered Wall Street firm, O''Neal broached the possibility
of a merger with the Charlotte, North Carolina-based Wachovia Bank without first
getting the approval of Merrill''s board. An angered board has apparently considered
the move as a major breach of corporate protocol.
board is reportedly so upset with O''Neal that it has even discussed the names
of potential candidates to replace him. Names discussed include chairman and chief
executive of investment firm BlackRock (partly owned by Merrill) Laurence D Fink,
and chief executive of the New York Stock Exchange (NYSE) John A Thain.
Merrill Lynch representative announced today, 26 October 2007, that there has
been no contact with any potential merger partners. A Wachovia representative
also declined to comment. All indications are that a merger with Wachovia is not
on the cards for now.
Wednesday, Merrill reported a third-quarter loss of $2.3 billion, and said it
would have to write-down $7.9 billion on subprime mortgages and complex debt instruments,
much more than the $5 billion it had predicted earlier.
days before the Merrill board meeting scheduled for Sunday, O''Neal apparently
called Wachovia chairman and chief executive G Kennedy Thompson to see whether
a merger was of any interest. Thompson apparently expressed interest, but underlined
the difficulty of striking a deal.
then reportedly asked Merrill co-president Gregory J Fleming to follow up with
Thompson. Fleming has a close relationship with Thompson, having represented him
on many merger deals.
merger would be mutually beneficial; it would help Merrill ride out the crisis
and give Wachovia some serious financial muscle. Wachovia is a no 97-pound weakling;
it actually has a higher market cap - about $86 billion to Merrill''s $52 billion.
But would a merger between Merrill (which has 15,000 retail brokers) and Wachovia
(10,000 brokers) survive an antitrust probe?
second-largest retail brokerage firm after it acquired A G Edwards, Wachovia has
been relatively unscathed by the recent market turmoil than Merrill, whose stock
price has fallen to $60.90 a share from a 52-week high of more than $98, making
it an attractive target for a takeover.
stock has fallen almost 10 per cent since the announcement of quarterly results,
and O''Neal has come under intense criticism for risk management failure. With
billions of dollars off its market cap and additional write-downs likely to be
waiting in the wings, O''Neal has fired a number of executives.
Fink is tipped to be the favourite for the job, if O''Neal is forced to leave.
Merrill Lynch is a 49 per cent shareholder in BlackRock, after it merged the asset
management business with the smaller firm in 2006.