Morgan Stanley, WaMu, seek mergers

18 September 2008

With the collapse of Lehman Brothers and  Bank of America picking up Merrill Lynch, the seismic readings from the financial earthquake at Wall Street seem to be increasing rather than abating. 

Now, with the American International Group being the latest entity to be bailed out by $85 billion government loan, other banks who find themselves next on the list to being hit have started looking at merger options to find some kind of safe harbour from the financial storm that is raging at Wall Street.

According to reports, Washington Mutual (WaMu) has put itself up for sale, and has asked investment banking firm Goldman Sachs to advise it. 

Possible buyers for WaMu are being reported as JPMorgan Chase, HSBC, Citi, and Wells Fargo, even though there have been reports that JP Morgan Chase is abstaining from the WaMu deal.
 
WaMu has said that its largest shareholder, priave equity firm TPG Capital, has accorded the bank permission to raise money, or sell itself without compensating TPG. TGP had invested $7 billion in the WaMu in April.

In a statement, TPG Capital said, "It became clear that it would be in the best interests of Washington Mutual and our investors to waive the price reset payment provisions that were agreed to with the bank at the time of our original investment in April 2008, Our goal is to maximize the bank's flexibility in this difficult market environment."

Reports also indicate that a fellow Fortune 500 bank, Wachovia, is also looking at merger options with Morgan Stanley, whose share price has been shredded by Wall Street's financial storm, even though it posted better-than-expected earnings.