Merrill would consider Bloomberg, BlackRock sales

By Elinor Comlay and Dan Wilchins

NEW YORK (Reuters) - Merrill Lynch MER.N CEO John Thain said that the world's largest brokerage would consider selling its stakes in news and financial data company Bloomberg and money manager BlackRock (BLK.N) if it needed more capital.

Speaking on a conference call, Thain said that he sees Merrill Lynch as "well capitalized," but added that the company last year considered selling its roughly $13 billion stake in BlackRock or its roughly $5 billion to $6 billion stake in Bloomberg.

Thain has never before said that Merrill Lynch would consider selling its stake in Bloomberg or BlackRock, and his willingness to shed some of the firm's strongest assets signal how difficult capital raising has become for investment banks.

"We will...figure out what makes the most economic sense for us, if we need to raise capital," Thain said.

Merrill Lynch raised more than $12 billion from a series of large outside investors, including sovereign funds such as Singapore's Temasek Holdings and the Kuwait Investment Authority, in December and January. Those capital raises came as the bank recorded more than $30 billion of writedowns in recent quarters.

The company's shares have fallen by about a third since that last round of capital raising, which would make issuing equity more expensive than it had been.

But another factor would also make issuing common shares costly for Merrill: investors who gave money to Merrill in December and January must receive extra compensation if Merrill raises additional capital at too low a price.

An analyst estimated that if Merrill wanted to raise $1 billion of new capital by issuing stock, it would have to raise a total of $2.7 billion because of the compensation for prior investors.

Given that cost, assets like the Bloomberg stake might make more sense to sell, even if Merrill Lynch would prefer to hold onto them, analysts said.

"Sometimes you sell what you can, not what you want to," said Ralph Cole, portfolio manager at Ferguson Wellman Capital Management in Portland, Oregon.

A spokeswoman at BlackRock declined comment. A spokeswoman for Bloomberg was not immediately able to comment.

FEW OBSTACLES TO A SALE

Speaking on a conference call, Thain said there were few obstacles to selling the Bloomberg or BlackRock stakes if it chose to.

"It is true that there are some liquidity restrictions on BlackRock and Bloomberg, but I don't believe that that would prevent us, if we decided to, from using either of them as means of raising capital," Thain said.

The investment bank agreed not to sell its stake in BlackRock until sometime in 2009, but Merrill Lynch could ask for permission to sell it, Thain said.