Updated from 3:18 p.m. EST
CEO John Thain is leaving to take the vacant CEO post at
NYSE Euronext on late Wednesday confirmed Thain's move to Merrill, after its board held an emergency meeting. Rumors had swirled since early in the day that Thain was stepping down to take one of two vacant, high-profile CEO posts at Merrill or
"I thought it was the best one for me," Thain said of the move to Merrill, in an interview on
. "I think I can in fact make a difference there."
NYSE's president and co-chief operating officer Duncan Niederauer is to succeed Thain as CEO. The changes take effect on Dec. 1, according to a NYSE statement.
Thain, who many analysts credit with bringing the stock exchange into the twenty-first century by transforming it through technology and acquisitions, has been widely cited as a candidate to take over the Citi and Merrill jobs. The top job at each bank has been vacant since CEOs Chuck Prince and Stanley O'Neal, respectively, resigned earlier this month and late last month amid much larger than expected writedowns of asset-backed securities such as collateralized debt obligations, or CDOs.
Alberto Cribiore, Merrill's interim chairman and head of its search committee, said Thain "brings unparalleled leadership experience and knowledge of the complexities of global capital markets, as well as the skills required to operate a large financial services company," according to a statement from the firm.
"John will be adept at balancing the focus on risk management and controls, while taking the steps necessary to ensure the company evolves and grows," Cribiore said. "He understands both the company's challenges, and as his track record shows, he appreciates the value associated with the Merrill global brand."
Thain said in the interview with
that Merrill first approached him two weeks ago, but the process "really came together over the weekend." He danced around whether he was approached by Citi for its open CEO job.
Merrill Lynch is a great franchise," Thain said. "Much of the business is actually doing very well, and then you have one part that's doing poorly.
The CDO business is a narrow part of their businesses."
Still, the industry is likely to take more writedowns on declining values of CDOs and subprime exposure, he said.
"I don't think we've seen the bottom," Thain said, but declined to discuss additional writedowns specifically at Merrill.
Investors have been wondering how much longer Thain, a 52-year-old former
president, would remain the head of the exchange.
Thain took over the helm at NYSE in 2004, when the exchange was in a period of uncertainty. NYSE was in desperate need of moving into electronic trading, as some feared that the exchange would become obsolete if it didn't. Members and brokers were also brewing from the scandal led by former NYSE head Richard Grasso, who was forced out over an excessive compensation package.
Thain was able to place a tourniquet on the Grasso scandal while at the same time succeeding in remaking the Big Board into a for-profit exchange. He took the company public last year, following a merger with Archipelago, and guided it through its merger with European exchange operator Euronext earlier this year.
Thain had said when he took the NYSE CEO position in 2004 that working at the Big Board would be a "three- to five-year job," but backpedaled on that timeframe after his three-year anniversary at the exchange came and went earlier this year. Thain said recently that there was still much to do at the exchange, such as expanding into Asia and further into the derivatives business.
But observers have been saying that if the right opportunity presented itself, Thain would jump ship.
Roger Freeman, an analyst at Lehman Brothers, says the chance to run Merrill Lynch is "pretty compelling."
"He has certainly demonstrated the ability to turn an organization around," Freeman says. "And that's what Merrill is going to need ... fresh thinking and new approaches. I think John is one person equipped to do that."
Thain has deep knowledge of the mortgage-backed securities industry. As a long-time veteran of Goldman, Thain helped establish and co-head Goldman's mortgage securities department in the late 1980s, among other roles. Securities that are backed by subprime mortgages are at the root of the ever-growing problem on Wall Street these days.
His forward thinking when it came to the NYSE -- he foresaw the necessity for the exchange to expand globally -- and his success in changing the exchange from a problem-child into a for-profit -- and profitable -- company might just be what investors are looking for at Merrill Lynch.
"He's done enough to sort of to be remembered as the most impactful
leader in the NYSE's history," says Jamie Selway, a managing director at White Cap Trading. "He really has presided over the transformation of the place."
Selway, a former Archipelago executive, said few expected Thain to remain at NYSE Euronext for long. "People viewed that move for him to go in, fix it up -- kind of almost a give back to the industry and move on," he said.
Still others say the fit between Thain and Merrill could be difficult.
Joe Capone, a managing member at Smart Financial Partners, a hedge fund focused on financial services equities, wonders how Thain will adapt to the Merrill culture.
"This is looking very similar to what he did when he went to New York," Capone says, who also is a contributor to
sister Web site,
. "It will be politically difficult. But that was no different than when he went to New York and the floor brokers were very skeptical."
Capone, who owns shares of Merrill Lynch, said "He's an outsider going into a difficult situation."
"The Merrill guys -- they're very insular. Everyone has been homegrown and to take Goldman guy -- who are his friends going to be within that place? Are the brokers going to trust him? Are the bankers going to trust him? I would be concerned about that if I were him."
Thain's first priority at Merrill will be to "get to know the people," he said on
Shares of NYSE Euronext closed down 23 cents to $86.74. Merrill shares rose $1.03 to $57.98 and Citi rose 14 cents to $36.04.