Summit Notebook

Thain says put shareholders first

John Thain says he put shareholders first and his interests second in deciding to sell Merrill Lynch to Bank of America.

Thain, speaking at the Reuters Global Finance Summit in New York, said a deal to sell a partial stake in Merrill Lynch to Goldman Sachs would have been better for him, but the sale of the entire Wall Street firm to Bank of America was the best outcome for shareholders.

Over a fateful weekend in September 2008, as Lehman hurtled toward bankruptcy, AIG floundered and the financial system looked into the abyss, Merrill held discussions with Bank of America, Goldman Sachs and Morgan Stanley for various transactions, Thain said.

Initial discussions with Bank of America involved either the sale of the entire company or a 9.9 percent stake and a multibillion credit line, the former Merrill CEO said.

With Goldman, discussions only involved the stake sale and the credit line. Discussions with Morgan Stanley about a strategic transaction were brief, he said.

“When Bank of America offered $29 a share on Sunday afternoon, it was clear to me that was the best thing for our shareholders,” Thain said. 

Thain was fired by Bank of America soon after the deal closed, and is now considering a career in private equity and other jobs. 

from DealZone:

Diamonds in the rough

Somewhere out there are ailing companies in need of a turnaround specialist. These experts -- also known as company doctors -- parachute into troubled businesses to turn their business around.

Funds, such as Oaktree Capital, HIG Capital and Apollo Management, specialise in buying up companies in distress (either through buying equity or debt) and turning them round.

And this should be a great time for these investors -- banks are loaded with stakes in troubled companies and unwieldy corporates may want to spin off unwanted businesses.

But banks are not playing ball. They want to wait until the economy recovers and sale values rise. So few companies are up for sale. But the funds want bank sales of stakes to accelerate otherwise it might be too late to turn these companies around.

Private equity certainly has the appetite for new deals. As Reuters reported yesterday, the private equity industry -- which may have up to $1 trillion in 'dry powder' -- is looking to the next restructuring wave for opportunities.

"Sponsors want new proprietary deals to show their limited partners they are not just churning portfolios," a top investment banker told the Reuters Restructuring Summit.