Merrill to sell Bloomberg, not BlackRock
Merrill Lynch & Co., the nation’s third-largest securities firm, dropped efforts to sell a stake in BlackRock Inc. and struck a deal instead to sell its 20% share of Bloomberg LP, according to people familiar with the decision.
Merrill, poised to report a second-quarter loss today, stood to gain about $2 billion on its 49.8% stake in BlackRock, the nation’s largest publicly traded fund manager, based on its current market value. BlackRock stock has fallen 17.5% this year, partly on concern that Merrill would divest its holdings.
Instead, Merrill agreed to sell its investment in Bloomberg, the parent of Bloomberg News, for $4.5 billion, a person familiar with Merrill’s plans said. Merrill is financing the sale to Bloomberg, said the person, who declined to be identified because the terms hadn’t been announced.
Merrill Chief Executive John Thain is selling assets as analysts at Citigroup Inc., Oppenheimer & Co. and Wachovia Corp. predict the company will report at least $5 billion of credit-market write-downs when it announces quarterly results. Merrill probably will post a loss of $3.95 a share, the Citigroup analysts estimate. That compares with earnings of $2.24 a year earlier.
“They needed to do something to provide confidence in Merrill’s balance sheet,” said Ryan Lentell, an analyst at Morningstar Inc. in Chicago. “You don’t want there to be any possibility that somebody can question your capital structure.”
Jessica Oppenheim, a spokeswoman for Merrill, declined to comment. BlackRock Chief Executive Laurence Fink declined to comment. Bloomberg spokeswoman Judith Czelusniak also declined to comment. All the firms are based in New York.
Thain, 53, has raised $17.9 billion since December from investors, including Temasek Holdings, Singapore’s sovereign wealth fund. Merrill’s $38.2 billion of write-downs and credit losses since the beginning of last year are the third-largest among banks and brokerages hit by the credit contraction, after Citigroup and UBS.
Merrill shares rose $3.31, or 13.4%, to $28. BlackRock climbed $14.77, or 9%, to $178.95.
Bloomberg is majority owned by New York City Mayor Michael Bloomberg.
