Here is an interesting article about the cash infusions that many Wall St. firms have been receiving from the state run investment funds of oil-rich and asian countries. What is interesting is that it appears that many of these funds expressed an interest in investing in American financial institutions a few months ago, but were rebuffed.
Temasek in talks to take Merrill stake
By Sundeep Tucker in Hong Kong
Published: December 21 2007 09:23 | Last updated: December 21 2007 09:23
Merrill Lynch is in “preliminary” talks with Singapore’s Temasek that could result in the US bank becoming the latest Wall Street titan to receive a significant cash injection from a sovereign wealth fund.
A person familiar with the matter on Friday said that the two sides had held discussions in New York in recent weeks about a potential multi-billion dollar investment by the Singapore state investment agency.
EDITOR’S CHOICE
Lex: Temasek joins the Wall Street party - Dec-21Ex-NYSE colleague joins Thain at Merrill - Dec-04Stefan Stern: Lessons of a bloody transition - Dec-03Merrill’s new chief eyes overhaul - Dec-02Transatlantic challenge for new NYSE boss - Dec-02Bankers’ bonuses require creativity - Dec-02Citigroup, UBS and Morgan Stanley have each sold large amounts of equity to sovereign wealth funds in the Middle East and Asia in recent weeks to bolster balance sheets that have been battered by losses relating to US subprime mortgages.
“Merrill and Temasek have been talking for a while about this although there are no indications that a deal is imminent,” said the person.
In October Merrill announced $8.4bn worth of writedowns on mortgage-related investments and corporate loans, and the departure of Stan O’Neal, its long-serving chief executive.
Some analysts predict that Merrill will announce an additional $8bn writedown when it unveils its fourth-quarter results in mid-January.
The US bank’s stock price has nearly halved this year, cutting its market capitalisation to around $47bn. Dealmakers believe that Merrill would be comfortable with Temasek taking a stake of around 10 per cent, should a deal materialise.
Merrill Lynch and Temasek on Friday declined to comment.
Morgan Stanley this week announced that it is to receive a $5bn capital injection from China Investment Corporation, having disclosed a total writedown in the fourth quarter of $9.4bn following a disastrous subprime bet.
Last week UBS took nearly $10bn from the Government of Singapore Investment Corp, a sister sovereign wealth fund of Temasek, while Citigroup last month received $7.5bn from the Abu Dhabi Investment Authority.
The deals have underlined the growing importance of sovereign wealth funds in the Middle East and Asia, and their increasingly bold moves to take advantage of the need for capital among western institutions.
The three deals have yet to be endorsed or scrutinised by shareholders of the investment banks. The Financial Times reported on Friday that UBS is facing a shareholder revolt over its planned re-capitalisation deal with GIC and a mystery investor based in Saudi Arabia.
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