Merrill Lynch Accepts $6 B; Temasek and Davis

123jump.com Staff
24 Dec, 2007
New York City

Merrill Lynch added 4% after asset sale and investment from two investors. Merrill sold its commercial finance division to General Electric with asset base of $10 billion. Merriill expects the sale will allow it to deploy $1.3 billion for other activities. Merrill also accepted $4.4 billion in investment with one-year lock up from Singapore controlled fund with an option to add $600 million more. Davis Advisors controlled fund has agreed to purchase $1.2 billion in stocks.

[R]11:00AM New York - Merrill Lynch sells its commercial finance division to General Electric and accepts $6.2 billion in investment.[/R]

Merrill Lynch ((MER)) after a recent string of losses in sub-prime loans is forced to sell assets and raise capital from new investors. Merrill jumped 4% to $57.80 today on the news of fresh investment from Singapore government controlled fund and from a mutual fund company Davis Selected Advisors based in Tucson, Arizona.

Separately, Merrill sold its commercial finance business to General Electric with assets of more than $10 billion.

GE Capital has agreed to purchase most of Chicago-based Merrill Lynch Capital, Merrill Lynch and Co., Inc.’s wholly owned middle-market commercial finance business according to a statement on Merrill web site.

Financial terms were not disclosed.

The acquisition, expected to close in the first quarter of 2008, will add more than $10 billion in assets and $5 billion in commitments to GE Capital Commercial Finance’s base of $260 billion.

Temasek, sovereign fund controlled by Singapore agreed to invest $5 billion according to sources in Singapore. Davis Selected Advisors P agreed to buy stocks worth $1.2 billion in Merrill Lynch according to news report on Bloomberg. Calls to Davis Funds were not returned seeking information on the purchase.

Temasek Holdings will invest $4.4 billion in Merrill Lynch common stock and has the option to purchase an additional $600 million of Merrill Lynch common stock by March 28, 2008. Its ownership position will at all times represent less than 10 percent of Merrill Lynch''s outstanding common stock.

Davis Selected Advisors will be making a long-term investment of $1.2 billion in common equity. Both Temasek Holdings and Davis Selected Advisors will be passive investors and will not have any rights of control and have no role in the governance of Merrill Lynch.

According to the term sheet released on Merrill Lynch web site, Temasek has agreed to a lock up period of one year for the investment. Temasek has agreed to pay $48 per share for a total of $4.4 billion.

Wachovia revised its earnings target for the fourth quarter and for the full year for Merrill Lynch. Wachovia now estimates that the broker will lose $3.87 per share and for the year will earn $6.03 per share lower from the previous forecast of $8.05. The broker also hinted that the earnings may be revised in the next two quarters if the current weakness in the credit markets persists.