Updated from 12:06 p.m. EST
In last-minute Christmas shopping, Singapore bought a stake in
at a credit-crunch discount.
Merrill said Monday that it will sell up to $6.2 billion in equity to fund firm Davis Selected Advisors and Temasek Holdings, a Singaporean state-owned investment company, as it attempts to recover from the blow of huge mortgage losses.
The announcement makes Merrill the latest in a string of major Wall Street banks to receive capital injections from Asian or Middle Eastern government-backed investors as the U.S. financial sector sinks deeper into turmoil.
Temasek will invest $4.4 billion in Merrill Lynch stock, and has the option to buy an additional $600 million worth of shares by March 28. Davis Selected Advisors, which manages $100 billion in assets, will buy $1.2 billion in stock.
The banking giant is selling the Temasek stake to the investors at $48 a share, according to media reports. That's about a 13% discount to its current market price. The deal promises to dilute existing shares of the company, but the investors will not have any control or governance role at the venerable Wall Street firm.
A Merrill Lynch spokeswoman did not immediately return a phone call seeking more details about the deal. Shares of Merrill fell $1.86, or 3.4%, to $53.68.
Merrill also earlier announced that it's selling most of Merrill Lynch Capital, the firm's middle-market commercial finance business, to
GE Capital unit. Financial terms weren't disclosed.
The agreements mark the latest dramatic step from Merrill in dealing with the credit crisis, which has already cost the firm's longtime CEO, Stanley O'Neal, his job. Former
New York Stock Exchange
CEO John Thain, O'Neal's replacement, has been aggressive in his efforts to contain Merrill's troubles, but two analysts predicted last week that mortgage writedowns at Merrill could double from what the company has already announced.
"One of my first priorities at Merrill Lynch was to strengthen the firm's balance sheet, and today we have made great progress towards that by bolstering our capital position through these investments and our announced sale of Merrill Lynch Capital," said Thain in a statement. "The benefits of these transactions are not limited to strengthening our financial position. We also see significant benefits from partnering with Temasek Holdings given its sizeable investments across Asia, particularly in Singapore, China and India."
In recent weeks,
have all announced investments from overseas banks after taking big hits from the mortgage meltdown.
News of the Merrill investment buoyed Wall Street on Monday, as major stock indices climbed early in the shortened Christmas trading session. Investors were reassured by the influx of capital abroad even as worrying signs of deteriorating credit conditions in the U.S. continue to emerge. Meanwhile, the American public has yet to come to terms with what such investments from foreign governments in major U.S. institutions will ultimately mean for the nation's economy.