On December 26th, just after Christmas, Merrill Lynch, one of Wall Street's five largest investment banks, announced a deal to sell
the majority of its commercial financing business to British Motor Group for $1.2 billion. The transaction is expected to close in January of the following year.
British Motor Group will acquire Merrill Lynch's commercial financing business and, along with the existing businesses of its various auto brands, form British Auto Finance to provide auto loan services to its customers.
The sale of this business will allow Merrill Lynch to secure $1.2 billion in capital, which it can reallocate to other businesses to mitigate losses.
Prior to this, Merrill Lynch had forecast that the group could face billions of dollars in asset write-downs in the fourth quarter.
To shore up its capital, Merrill Lynch not only sold the majority of its commercial financing business to British Motor Group but also sought additional capital injections.
Those currently in contact with Merrill Lynch included Li Jiapo's Temasek Investments, Davis Select Advisors, and Caesars Funds, a subsidiary of DS Group.
Baron's involvement in Merrill Lynch's financing at this time was intended to provide him with early access to Merrill Lynch's internal structure, thereby positioning him for a front-runner position in the future pie when the subprime mortgage crisis devastates the American financial industry.
Previously, Wall Street investment banks, reeling from the subprime mortgage crisis, had received multiple injections of capital from sovereign wealth funds.
For example, in November of this year, the Abu Dhabi Investment Authority, the UAE's sovereign wealth fund, invested $7.5 billion to acquire a 4.9% stake in Citigroup. Earlier this month, the Lijiapo Government Investment Corporation invested CHF 11 billion in UBS for a 9% stake. Subsequently, China Investment Corporation invested $5 billion in Morgan Stanley, acquiring up to a 9.9% stake.
This time, Caesars Funds is also preparing to invest $5 billion to acquire up to a 10% stake in Merrill Lynch.
According to Merrill Lynch's announcement, they plan to raise up to $6.2 billion in total, and they estimate they may also record $8.6 billion in mortgage-related losses next month.
Through this private placement of common stock, Merrill Lynch will increase its book value while diluting its existing shareholders' equity by approximately 13%.
...
"We've seen India achieve significant growth since the turn of the century and will become one of the world's leading economic engines. This is why I place such importance on investing in India..."
Baron said in a speech before Christmas during a visit to the Indian Institute of Technology in the ancient city of Kanpur.
"When I arrived in Mumbai, I could hardly believe my eyes. I had never imagined I would see such a modern city in India. Certain areas of Mumbai even remind me of Silicon Valley in the United States. Perhaps in the future, it will surpass both Silicon Valley and London's TechCity. Yes, I believe so."
Indeed, India's IT industry is indeed developing rapidly, which is in part due to the widespread use of English. As we all know, India was ruled by Britain for nearly 200 years, and English was the sole official language in India until 1965.
On the other hand, India's emphasis on science and engineering is another major factor in the development of its IT industry. For example, the Indian Institute of Technology, which he visited, is the best university in India.
Of course, Barron's praise was very appealing to the Indian students and local media present – after all, it's profitable, and saying something nice isn't shabby. Prior to this, not only will Argent Real Estate Group participate in the construction of several major projects in Mumbai, but both Woaw and Skype will also establish customer service centers in India, leveraging India's low labor costs and relatively high quality of service to provide global customer service.
This isn't surprising, as many tech companies outsource their customer service to Indians. After all, the cost is low, and even though the local English has a hint of curry, it's not incomprehensible.
Furthermore, O2 will partner with Reliance Infocomm, a subsidiary of the Reliance Group, to form O2 Reliance Telecom. Each company will hold a 50% stake and provide mobile and broadband services in India.
Reliance Infocomm, established just this year, lags significantly behind operators like Vodafone Idea and Tata Telecom, which have larger market shares in India.
However, Reliance Group's Mukesh Ambani remains ambitious in the telecom industry, and after collaborating with Barron, the two companies hit it off, leading to the O2-Reliance Telecom partnership.
For well-known reasons, partnering with local giants in India is the safest option. For example, Vodafone Idea, which currently holds the highest market share in India's telecom market, is a joint venture between Vodafone and Idea.
India has a large population, and the telecom industry presents a significant market opportunity, making entry into this market highly desirable.
Furthermore, this partnership will also allow Honor Electronics' budget-friendly Dopod smartphone brand to enter the Indian market, effectively killing two birds with one stone.
Or perhaps even more than that: once O2 and Reliance Telecom gain traction in India, they will also be able to introduce the online video platform DailyVedio.com to the Indian market. On December
31st
, before the start of 2008, Merrill Lynch announced that it had selected Caesars and Davis Select Advisors, subsidiaries of DS Group, as its investors.
Caesars will invest $5 billion in Merrill Lynch.
Through this capital injection, Caesars will purchase $5 billion worth of Merrill Lynch shares at $48, a 13.6% discount to Merrill Lynch's closing price last week. Caesars will now hold a 9.9% stake in Merrill Lynch.
Additionally, New York-based Davis Select Advisors will purchase $1.2 billion of Merrill Lynch common stock for long-term investment.
Merrill Lynch also announced that with its 9.9% stake, Caesars will be allowed to appoint a representative to its board of directors and have one vote.
Following this capital injection, Merrill Lynch's stock price saw a slight increase.
The newly issued common stock will dilute existing shareholders' equity by approximately 13%.