Chapter 579 Investing in Merrill Lynch
On December 26, just after Christmas, Merrill Lynch, one of the five major investment banks on Wall Street, announced that they had just reached an agreement.
Merrill Lynch will sell most of its commercial financing business to British Automotive Group for $1.2 billion, and this part of the transaction will be completed in January next year.
After acquiring Merrill Lynch's commercial financing business, British Automotive Group will use this as a basis, plus the related businesses of their various automobile brands before, to form British Automotive Finance Company to provide car loan related services to its users.
By selling this part of its business, Merrill Lynch can obtain $1.2 billion in funds and reallocate them to their other businesses to recover some losses.
Prior to this, according to Merrill Lynch's forecast, their group may face billions of dollars in asset impairment again in the fourth quarter.
In order to replenish capital, Merrill Lynch not only sold most of its commercial financing business to British Automotive Group, but also sought more capital injection.
At this time, those who contacted Merrill Lynch, including Li Jiapo's Temasek Investment, Davis Select Advisors and Caesar Fund under DS Group, were all in talks with them.
The reason why Barron participated in the financing of Merrill Lynch at this time was that he was preparing to enter Merrill Lynch in advance, so that he could have a priority position in the future "sharing" after the subprime mortgage crisis completely detonated the financial industry of the United States.
Prior to this, Wall Street investment banks in the subprime mortgage crisis had received multiple injections from sovereign wealth funds.
For example, in November this year, the Abu Dhabi Investment Authority, the sovereign fund of the United Arab Emirates, invested US$7.5 billion to purchase 4.9% of Citigroup's shares; earlier this month, the Lijiapo Government Investment Company invested 11 billion Swiss francs in UBS to obtain 9% of the bank's equity; afterwards, China Investment Corporation invested US$5 billion in Morgan Stanley and acquired no more than 9.9% of the latter's equity.
This time, Caesar Fund is also preparing to inject US$5 billion to obtain no more than 10% of Merrill Lynch's shares.
According to Merrill Lynch's announcement, they are preparing to raise a total of no more than US$6.2 billion this time. According to estimates, they may have to accrue US$8.6 billion in mortgage-related losses next month.
Through this private placement of common stock, Merrill Lynch will enrich its book value while the equity of its original shareholders is estimated to be diluted by about 13%.
…
"We have seen that India has made great progress since the new century and will become one of the world's most watched economic engines in the future. This is why I value investment in India so much..."
Before Christmas, Barron visited the Indian Institute of Technology in the ancient city of Kanpur and said in his speech:
"After I arrived in Mumbai before, I could hardly believe my eyes. I didn't expect to see such a modern city in India. In some areas of Mumbai, I can even think of Silicon Valley in the United States. Maybe in the future, this will become a place that surpasses Silicon Valley and London Technology City. Yes, I think so."
In fact, India's IT industry is indeed developing rapidly. Of course, this is also due to the popularity of English in some aspects. As we all know, India was ruled by Britain for nearly 200 years. Before 1965, English was the only official language in India.
On the other hand, India's emphasis on science and engineering is another major reason why its IT industry can develop. For example, the Indian Institute of Technology he visited is the best university in India.
Of course, Barron's praise was naturally very useful to the Indian students and local media present - it's good to make money, and it's not bad to say something good.
Before that, not only will Argent Real Estate Group participate in the construction of some important projects in Mumbai, but also Woaw and Skype will establish their customer service centers in India, using India's cheap human resources and relatively good labor quality to provide customer service to users around the world.
In fact, this is not surprising. Many technology companies will outsource their customer service to Indians. After all, the cost is very low. Even if the local English has some curry flavor, it is not to the extent that it is incomprehensible...
In addition, O2 Telecom will cooperate with Reliance Infocomm, a subsidiary of Reliance Group, to establish O2 Reliance Telecom, with each party holding 50% of the shares to provide telecommunications services such as mobile communications and broadband in India.
Reliance Consulting Communications was just established this year, and it is far behind operators such as Vodafone Idea and Tata Telecom, which have a higher market share in India.
However, Mukesh Ambani of Reliance Group is still very ambitious in the telecommunications industry. Therefore, after cooperating with Barron, the two sides hit it off and facilitated the cooperation between O2 Telecom and Reliance Communications.
For well-known reasons, it is safest to cooperate with local giants in India. For example, Vodafone Idea, which currently has the highest market share in India's telecommunications market, is a joint venture between Vodafone and Idea.
India has a large population, and the telecommunications industry will also have a very large market. It is still worthwhile to be able to enter this market.
In addition, this cooperation can also enable Honor Electronics' affordable brand Dopod mobile phone to gain access to the Indian market, which can be said to be killing two birds with one stone.
Or it is not just killing two birds with one stone. After O2 Reliance Telecom has developed in India, it can also introduce the online video platform DailyVedio.com into the Indian market.
…
On December 31, before the arrival of 2008, Merrill Lynch announced that it had finally selected Caesars Group and Davis Select Advisors under DS Group as their investors.
Among them, Caesars Fund will invest $5 billion to inject capital into Merrill Lynch.
Through this injection, Caesars Fund will purchase $5 billion worth of Merrill Lynch shares at a price of $48, which is a 13.6% discount compared to Merrill Lynch's closing price last week. So far, Caesars Fund will hold 9.9% of Merrill Lynch shares.
In addition, Davis Select Advisors, headquartered in New York, will purchase $1.2 billion of Merrill Lynch common stock for long-term investment.
At the same time, Merrill Lynch also claimed that after holding 9.9% of the group's shares, Caesars Fund will be allowed to send a representative to their board of directors and have one vote in the board's votes.
After this capital injection, Merrill Lynch's stock price has risen slightly.
The interests of their group's original shareholders will be diluted by about 13% by these newly issued common shares.