Posts filed under “M&A”
Its just a rumor, but WTF: Maybe Bank of America IS following part of our advice, spinning out Merrill Lynch in a sale. I assume this is a quasi-distressed sale, otherwise we’d see an IPO (but for market conditions).
Of course, a full blown pre-packged bankruptcy would be the better route. Remember, the bailouts were not about you or the economy or the financial system — it was all about rescuing big bond holders.
Here’s a reminder of our consistent advice going back to late 2008, most recently published August 28:
Imagine: What if we’d gone Swedish on banks like Citi and BofA — nationalize ’em, clean ’em up, spin them back out to the markets by placing them into a prepackaged reorganization (a polite phrase for bankruptcy). Here’s how that might have played out:
First, the easy stuff: Fire senior management. Not just the chief executive. Nearly the entire top floor at the bank, including the board of directors, is canned. Equity shareholders are wiped out. Whatever is left after all is said and done goes to the bondholders, typically, at 25 to 50 cents on the dollar. (In Sweden, bondholders got 100 cents on the krona, but that currency was significantly devalued. So the bondholders were not made whole; they lost 50 to 75 percent in real value.)
Temporary nationalization is the play: Uncle Sam provides debtor-in-possession financing to keep operating. All of the bad holdings, mortgages, derivatives and other liabilities are pulled out and auctioned off. This includes the bad real estate (REOs), the CDS/CDO book, defaulted mortgage obligations. Remember, there are no such thing as toxic assets, only toxic prices. At some valuation, these are worthwhile investments — just not 100 cents on the dollar. Let healthy buyers pay 15 to 30 cents. And anything that is worthless gets written down to zero.
Recapitalize the parent bank, and spin off each division: IPO Merrill Lynch for $20 billion. Spin out a clean Countrywide for maybe $8 billion. Sell off all the non-depository bank pieces.
What you have left is a well-capitalized bank, owned by taxpayers, with well-capitalized divisions as stand-alone companies. All of the above have transparent balance sheets. Eventually, everything gets IPO’d back to the public markets. Uncle Sam gets repaid, and whatever is left (if anything) goes to the bondholders.
Any buyers for Countrywide . . . ?
UPDATE: September 8, 201
WSJ reports Mother Merrill Staying Put
Time to put on the lawyer hat again: As soon as this story broke, the immediate question was “Why would you be actively trading stocks for your own account when you work for Warren Buffett and recommend acquisitions?” That seems fraught with potential for problems. Does anyone on Berkshire’s legal staff and/or compliance department have…Read More
> CNBC’s John Melloy mentions what may be the best analysis I’ve seen on the “Charlie Sheen effect.” It comes from Lou Kerner, a keen eyed analyst at Wedbush. (See chart above) Kerner notes that Sheen may be Twitter’s “Lazy Sunday” moment: Content Creators #Winning In December, 2005 a Saturday Night Live skit called Lazy…Read More
> The recent a merger chatter between the NYSE and the Deutsche Börse got us wondering: How might life at the NYSE change under their new German management? 10. Effective immediately: No more bell ringing when Chairman David Hasselhoff has a hangover. 9. NYSE changes its tagline to “Das Equities.” 8. Sylvia Wadhwa on the…Read More
It’s day two of the $315 million AOL-Huffington Post deal and the non-news just keeps on coming. On the same day that there was $16 billion in M&A, we’re still talking about a tiny deal for advertising inventory. Tim Armstrong’s deal isn’t really the issue. The most important takeaway from the deal is the limited…Read More
The Huffington Post, Ariana Huffington’s news and political focused website, has been acquired by AOL for $315 million — $300 million cash, the rest in stock. Huff Po began in 2005 with a $1 million investment; it has since grown into one of the most heavily visited news Web sites in the country. The NYT…Read More
> The WSJ is reporting that the SEC is looking at specific Health Care takeovers that seemed to be tipped in advance to several big hedge funds. The chart (above) shows the extent and timing. There are many legal reasons to have owned these names, but the issue here is whether or not the funds…Read More
The WSJ occasionally buries huge stories in its much less read weekend edition; recall the option backdating investigation in 2006. This past weekend was a classic example of this: “Federal authorities, capping a three-year investigation, are preparing insider-trading charges that could ensnare consultants, investment bankers, hedge-fund and mutual-fund traders, and analysts across the nation, according…Read More