The Mother of all Mondays
Kurt Brouwer September 14th, 2008
The folks at the Wall Street Journal’s MarketBeat Blog [emphasis in the original] have been busy this weekend trying to track all the rumors and events swirling around Wall Street. To recap the news, Lehman Brothers, the venerable investment banking firm, has been unsuccessfully seeking a suitor. But, Merrill Lynch may have found a white knight at Bank of America of all places.
The Mother of all Mondays (Wall Street Journal/MarketBeat Blog, September 14, 2008, Tim Annett)
Investors world-wide have rarely rolled out of bed to face a Monday morning quite like the one they’ll contend with this Monday.
Sundays have long been host to important corporate news, from big mergers to bankruptcies. But this weekend, in an extraordinary meeting that recalled the summit called ten years ago amid the meltdown of hedge fund Long-Term Capital Management and J. Pierpont Morgan’s efforts more than 100 years ago to rescue a series of ailing banks, Wall Street’s most senior deal makers and regulators raced to find a deal that would keep storied Lehman Brothers Holdings from collapse. At this hour, their efforts have yet to yield any fruit. Barclays, which had come to be viewed over the weekend as the most likely bidder for the badly ailing Lehman, pushed away from the bargaining table on Sunday. The main impediment appeared to be that the U.S. government is reluctant to backstop a deal, as it had amid the Bear Stearns meltdown in March.
…One possible Lehman suitor, Bank of America, has reportedly meanwhile taken up merger talks with another brokerage giant that has been battered by the credit crisis – Merrill Lynch. Strategically, a union of Bank of America and Merrill Lynch would merge BofA’s sprawling retail banking business with Merrill’s vast brokerage network. Bank of America has a deep well of capital due to its massive deposit base. A deal could chase at least some of the gloom swirling around the financial sector because of Lehman. Merrill shares were slammed last week alongside Lehman.
Adding to the whorl, American International Group (whose shares were also clobbered last week amid growing concern about the extent of its losses on CDS and other derivatives) plans to disclose a restructuring on that Monday that is likely to include the sale of major assets, including its aircraft-leasing business, International Lease Finance Corp., the Journal reported today. The insurance giant, a component of the Dow Jones Industrial Average, is hoping to raise more than $10 billion. The company has already raised $20 billion in fresh capital this year.
Closing out the spate of news on Sunday, MarketBeat Blog had one final update:
…UPDATE at 8:44 PM EDT: Bank of America has reached a deal to buy Merrill Lynch for $29 a share, sources tell the Journal. The boards of both companies have approved the deal.
Well, let’s strap on our seatbelts and get ready for a wild ride.
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