Merrill To Sell BlackRock Stake?
Citi analysts conclude sale of BlackRock stake could help Merrill's balance sheet.
July 7, 2008
Merrill Lynch may post $6 billion worth of write-downs in the second quarter, according to report published by Citigroup on Sunday. That same report also points out if Merrill sells its a stake in BlackRock, it could buttress its balance sheet, which has been slammed by several quarters of massive write-downs.
Citigroup's analysts also noted that Merrill could shore up its balance sheet by $1 billion with a cut in its dividend payment.
In their report, Citigroup analysts estimate that Merrill will write down $4.8 billion related to super senior classes of collateralized debt obligations and $2.2 billion on credit valuation adjustments related to financial guarantors.
According to Citigroup, Merrill could raise $1 billion to $2 billion by selling a stake in BlackRock. That stake in BlackRock, totaling 49%, has a market value of roughly $11 billion and Merrill could generate up to $2.6 billion of after-tax gains by selling all or a portion of its investment in BlackRock.
Merrill Lynch would need BlackRock's permission to sell a stake in the company prior to September 29, 2009, as a result of their three-year lock-up agreement.
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