There is an intriguing scenario developing at Merrill Lynch, the giant US investment bank bailed out last year by global investors among which Kuwait was prominent. It seems Merrill needs to be bailed out again.
I can see no other interpretation of the whispers from New York that Merrill is considering selling some or all of its 20 per cent holding in Bloomberg as part of its drive to focus on core financial business sectors and further shore up its creaking balance sheet. It is also said to be planning a disposal of the 49 per cent stake it has in buy-out firm BlackRock.
Merrill is considering these disposals because of a pledge by its chief executive John Thain that the bank would not need to raise more equity from its shareholders. He is right to stick by that pledge. Investors who stumped up last year when the share price was considerably higher would not be pleased to have shares offered at current discounted prices, unless they had a chance to take part on even more advantageous terms. Selling Bloomberg, though, is a loud signal that the pain at Merrill – and therefore we must assume at the rest of the Bulge Bracket firms on Wall Street – is far from over. The bank, as a founder investor in Michael Bloomberg's baby – has held the stock for 20 years, and has been a supportive sleeping partner in the great Bloomberg success story.
With a value of about $5 billion (Dh18.35bn), Merrill cannot just put up a "for sale" sign and watch the bids roll in. First, it must offer the stake back to Bloomberg, and only if a deal cannot be reached will it be able to hawk it around elsewhere.
In the current market, financial data and news providers might not be the "must have" assets they clearly were in the boom years, but Rupert Murdoch's News Corporation, fresh from its triumph with Dow Jones, could regard a 20 per cent strategic holding in its main rival too tempting a prospect to ignore. There are a lot of big corporate egos at stake in this one.