Yes, Merrill's shareholders lucked out of $50 billion due to the missed opportunity in 2007 but BofA's shareholders also lucked out when BofA's stock price declined following the acquisition of Merrill Lynch. It's a zero sum game and a lemon is a still lemon!
Stan O’Neal Almost Sold Merrill To BofA For $100 Billion In 2007
(This post appeared at Credit Writedowns.)We are now hearing former Merrill Lynch CEO Stan O’Neal’s side of the story for the first time since he resigned in October 2007. In a story by William Cohan in Fortune Magazine, O’Neal paints a picture of Merrill’s fall from grace that at once reveals O’Neal’s own deficits and foresight but that also reveals a lot about bank of America CEO Ken Lewis and Merrill Lynch’s Board of Director’s.
O’Neal approached Ken Lewis, then the CEO of Bank of America, about selling Merrill to BofA for $100 billion, according to O’Neal, in an account corroborated by other Merrill Lynch executives. Apparently O’Neal was concerned about the health of Merrill and wanted to seek a partner with a balance sheet which could weather the meltdown in subprime-related assets. He considered both Barclays and Bank of America as the two obvious bidder, eventually approaching Bank of America with an offer for sale.
Twice in 2007 O’Neal tried to negotiate deals to sell Merrill at premium prices, only to encounter crushing opposition from an unlikely source: Alberto Cribiore (pronounced Crihbe-OR-ee), a friend whom O’Neal had appointed to Merrill’s board four years earlier. Given his extensive Wall Street experience, Cribiore, a former partner at private equity firm Clayton Dubilier & Rice, wielded outsize power. He argued vociferously that O’Neal was too negative and that Merrill could address its CDO problem without having to sell the firm at a moment of weakness.
This pitched battle between the CEO and the board member, largely unexplored until now, shows how a single person was able to thwart what may have been Merrill’s salvation. And it suggests that O’Neal’s failure consisted as much of his inability to persuade his board to take necessary action as it did in his earlier cluelessness about the risks posed by the mountains of CDOs, those bundles of debt securities, many of them tied to subprime mortgages.
Whatever you think, one conclusion is inescapable: This conflict cost Merrill shareholders dearly. In the aborted 2007 negotiation, O’Neal seemed close to a deal with Bank of America to sell for about $100 billion. When Merrill was finally unloaded a year later to the same buyer, it went for half that amount. In all, the failure to sell in 2007 would cost Merrill shareholders some $50 billion.
This story is significant for a number of reasons.
Read more: http://www.businessinsider.com/stan-oneil-almost-sold-merrill-to-bofa-for-100-billion-in-2007-2010-4#ixzz0liFCgZXA
Former Merrill Chairman Stan O'Neal claims attempts to sell bank were blocked
Stan O'Neal, the former head of Merrill Lynch, has alleged that he was twice blocked in his attempts to sell the investment bank during 2007 by a fellow director.
Stan O'Neal, the former head of Merrill Lynch, alleges two attempt to sell the investment bank in 2007 were blocked. Photo: Bloomberg
Mr O'Neal, who resigned from Merrill in October 2007 amid ballooning sub-prime write-downs, disclosed that he tried on two separate occasions to sell the troubled bank approximately 12 months before its discounted sale to Bank of America at the height of the financial crisis.
The former Merrill chairman said he realised in late August 2007 the size and extent of the problem facing the bank, which was heavily exposed to collateralised debt obligations (CDO's) and other sub-prime laden derivatives.
On returning from Martha's Vineyard, where he had been on holiday, Mr O'Neal admitted that he didn't "know how deep the hole" and told board colleagues that he couldn't just take a sizeable write-down: "Whatever value we come up with is highly theoretical."
The veteran banker, speaking for the first time since his exit from Merrill – in an interview with Fortune magazine – revealed that he instead devised a plan to attempt to sell the bank, to deliver the maximum possible return to shareholders.
The two sales discussions included one in late September 2007 with BoA's then chairman Ken Lewis and head of risk Greg Curl, which centred on selling Merrill for $90 to $100 a share, considerably higher than the $29-a-share price the investment bank was eventually sold for. The other discussion involved early-stage talks with Wachovia, which also came to nothing.
Mr O'Neal, who still sits on the board of Alcoa, alleges that his attempts to sell Merrill were blocked by Alberto Cribiore, the Italian financier whom he brought onto the board in 2003 and eventually succeeded him as interim chairman.
Mr Cribiore, now at Citigroup, told Fortune that he was not aware of the discussions with BoA until a year later. However he is alleged to have told Mr O'Neal that Merrill should deal with the problem first-hand and focus on writing down the value of its troubled assets.
A Citigroup spokesman declined to comment further on Mr Cribiore's behalf.
Read more: http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/7595243/Former-Merrill-chairman-Stan-ONeal-claims-attempts-to-sell-bank-were-blocked.html
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