Friday, September 2, 2011

Mother Merrill May Yet Again Breathe the Sweet Air of Freedom (BAC)

Or not.
It pays to remember that Merrill put themselves in harms way and only avoided Lehmanizing themselves at the last minute. We posted "9:00 p.m. EDT: Merrill Lynch- Board Meeting to Approve Takeover by BankAmerica (BAC; MER)" on Sunday September 14, 2008. That was less than 12 hours before LEH filed their bankruptcy.

Here's Forbes commenting on a Wall Street Journal report::

Bank Of America's Latest Peril: Losing Merrill Lynch?
Who would have thought that Bank of America’s most precious asset would end up being Merrill Lynch, the investment firm that was on death’s doorstep in 2008 until the bank stepped in and bought it?
Well, that’s certainly the case today about 2.5 years after the acquisition. As BofA struggles with record losses and an ugly stock performance Merrill Lynch’s investment bank and brokerage business are generating profits that the bank desperately needs.

But that marriage might be trouble. The Wall Street Journal is reporting that Bank of America would consider issuing a separate class of shares tied to Merrill’s performance in an effort to raise capital. The idea of creating so-called Merrill tracking stock was in response to a request from the the Federal Reserve which asked for contingency plans if things got worse for the bank.

The Merrill tracking stock is one option that CEO Brian Moynihan offered Ben Bernanke but it’s a critical one that may spark talks of possibly spinning off the unit completely. That would be an extreme measure considering the bank has spent much effort since 2009 to integrate Merrill into its platform as a way to boost its own bottom line. Merrill financial advisors are selling BofA banking products to their wealthy clients. The cross-selling effort lifts the banks deposits and loans....MORE
Here's one of the Journal stories, from the Heard on the Street column:
Tracking Error for BofA
Bank of America has a curious notion of what could bolster investor confidence.

In a list sent to the Federal Reserve of potential measures the bank could take should its situation worsen, BofA included the idea of a tracking stock for Merrill Lynch, according to a Wall Street Journal article. The trouble is such a move wouldn't necessarily signal strength. If anything, investors might interpret it as a sign of desperation.

For starters, tracking stocks, which typically don't confer ownership or voting rights on holders, have a fairly dismal history. They conjure images of days, when the instruments came into vogue.
Then there is the idea that a tracking stock for Merrill, which BofA purchased in early 2009, would really make investors ascribe it more value than BofA overall is currently getting credit for....MORE
And so I don't forget where I put it, here's the speech made by a MER employee who happens to be the son of a founder, on the occasion of the shareholder vote to approve the acquisition by BAC:
Goodbye Merrill Lynch - 'Shame, Shame, Shame' (Winthrop H. Smith: Address to the Shareholders of Merrill Lynch)

The post immediately below on Richard Bernstein's departure from Mother Merrill reminded me of an article in 'Here is the City' back in December. I rarely copy out complete posts/articles/stories, figuring that good writing deserves the traffic/exposure but in this case I am going to, for fear that TITC might someday let the link expire. Here's a bit of history:

Below is an impassioned speech delivered Friday to shareholders Winthrop H. Smith, a long-time Merrill employee and son of one of the founders, as they gave the go-ahead to merge with Bank of America.
'Thank you for allowing me to say a few words on this most important morning. I will say more about you in a moment, but I just wanted to thank you up front for your leadership and all you have attempted to do this past year.

Fellow Shareholders, I speak to you today as a 28 year employee, a shareholder and the son of one of the founding fathers of Merrill Lynch.

On January 6th, 1914, Charlie Merrill opened a one man shop just a few blocks from where we are today. A year later he was joined by his friend, Eddie Lynch and the first Merrill, Lynch & Co. was launched. One year later, my father joined the firm straight out of Amherst College. Thus began a wonderful partnership and friendship that lasted a life time.

Like Merrill Magowan I have been privileged to know every CEO of Merrill Lynch from Charlie Merrill to John Thain. Most of them, including John, were principled leaders who never placed their interests ahead of those of the firm. Most of them valued and promoted the principles that Charlie Merrill created and most of them cared deeply for the welfare of their fellow colleagues....
The pic is Delacroix's Liberty Leading the People.
BAC is leading the market, down 7% at $7.36 with the indices down 1.75 to 2%