|September 16, 2008|
|Hats off to John "The Hired Gun" Thain for Pulling Off the Merrill Deal|
|By Kevin McCauley|
|Let’s hear it for John “The Hired Gun” Thain, the Merrill Lynch CEO who arranged the shotgun marriage with Bank of America. |
The $50B all-stock deal salvages a modicum of respect for Mother Merrill, whose reputation was severely tarnished by the financial antics of Stan O’Neal. The ousted O’Neal steered Merrill into the wild and wooly world of subprime mortgages, and paid the price when the investment banker’s house of cards collapsed.
Thain, the former New York Stock Exchange chief and a top Goldman Sachs exec, was brought in to deal with Stan’s mess in December. Merrill recorded a whopping $4.6B loss during the second-quarter of `08. Thain will move on to new challenges when BoA completes the deal. Godspeed, John.
Vultures were circling over Merrill’s headquarters, ready to pick over the carcass of America’s broker. Merrill could have gone the way of Bear Stearns or Lehman Brothers, which filed for Chapter XI today, following a year of denial that anything was untoward in that once-proud investment house.
Alternatively, Merrill could have accepted the drip, drip torture techniques that currently are being endured by other giants such as Washington Mutual and American International Group. Thain (a believer in the Bush Doctrine?) acted boldly and cut a deal to prevent any further hemorrhaging at Merrill.
Shareholders may gripe that the BoA deal values their shares at $29. That’s a far cry from the $93.10 closing price of Merrill in `06, but it a lot better than the $10 a-share that BS holders received. And believe me, staffers at Lehman would currently sell their souls if they could get $29 each for their now nearly worthless shares. Lehman shares trade at 18 cents each, down from a $67.73 52-week high.
Here’s a big thumbs-up for Thain. Best wishes to Merrill’s staffers, the firm has deep roots in New York and deserves praise for its policy of hiring people with blue-collar backgrounds.
Merrill stockholders are bullish on the deal, bidding up shares more than 15 percent to $19.74 today.
BoA shareholders are not so hot. The bank's shares are down $5 today. Merrill is only a good deal for BoA if it is allowed to return to its retail roots. BoA CEO Ken Lewis, who is currently grappling with the intetregration of basket case Countrywide Financial, says that's the plan for Merrill.
Good luck with it.
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