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WASHINGTON : US banking and brokerage titan Merrill Lynch said on Monday that Temasek Holdings Pte. Ltd., a Singapore investment company, will buy a hefty 4.4 billion dollar stake in the investment firm.
Temasek will also have the option to purchase an additional 600 million dollars of Merrill Lynch stock by March 28 under the deal's terms.
The US investment house, which is reeling from multi-billion dollar losses in ailing mortgage investments, said Temasek's ownership stake would remain under 10 percent.
The deal is the latest in which a cash-rich foreign state-controlled fund has bought a big shareholding in a US bank.
Morgan Stanley, one of America's most prestigious investment banks, announced last Wednesday that the China Investment Corporation (CIC) had obtained a five-billion-dollar stake in the firm.
That deal enables CIC to gain up to a 9.9 percent shareholding in Morgan Stanley.
It followed fast on the heels of a similar transaction last month which saw the Abu Dhabi Investment Authority of the United Arab Emirates become one of Citigroup's biggest shareholders through a 7.5 billion dollar investment.
Both Morgan Stanley and Citigroup, like Merrill Lynch, have seen their finances stressed by mortgage investment losses tied to the sharp downturn in the US housing market.
"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," said Merrill's new chief executive officer and chairman John Thain.
Thain was also referring to a decision by Davis Selected Advisors, a US investment group, to invest 1.2 billion dollars in Merrill boosting the total sum of the announced investments to a total 6.2 billion dollars.
Merrill ousted its former CEO Stan O'Neal in late October after announcing nearly eight billion dollars in writeoffs, mainly related to soured mortgage investments. Analysts expect Merrill to unveil further losses when it releases its fourth quarter earnings.
State-controlled funds, particularly from China, have been aggressively stepping up their investments in top US banks and financial firms in recent weeks.
Some US lawmakers have voiced concerns about the deals on national security grounds, but none of the deals have so far been blocked by American regulators.
Thain said that aside from the quick injection of fresh capital, which will help Merrill shore up its troubled balance sheet, the deal with Temasek would enable the investment bank to boost its business in Singapore, China and India.
Merrill stressed that both Temasek and Davis Selected Advisors would be "passive" investors and have no control over Merrill's management or daily operations. - AFP/ch/de
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