June 13, 2008 / 12:18 AM / 10 years ago

Merrill's Bloomberg stake could fit Bloomberg best

NEW YORK (Reuters) - News and information company Bloomberg LP could be a hotly contested asset if a stake went on the block, although the most likely buyer was seen by some as founder and billionaire Michael Bloomberg himself.

Merrill Lynch MER.N CEO John Thain said on Wednesday that the world’s largest brokerage would consider selling its 20 percent stake in Bloomberg worth an estimated $5 billion to $6 billion.

Sovereign wealth funds, flush with cash; private equity; or media rivals -- like News Corp NWSa.N, General Electric Co (GE.N), with its CNBC business news television channel unit, and Financial Times publisher Pearson PLC (PSON.L) -- could see it as an alluring asset.

“It’s a very important strategic asset. There’s nothing quite like it,” said Rick Wetmore, analyst at Turner Investment Partners, who managed about $26 billion as of the end of March. “There’s a whole host of organizations that would like it: sovereign wealth, private equity, a big media company.”

New York Mayor Bloomberg, who founded the company and still owns around 70 percent, could use some of his estimated $10 billion fortune in buying Merrill out.

Financial data about the privately held Bloomberg is hard to come by, but David Anderson at Inside Market Data Reference, who follows news and data services like Bloomberg and its primary competitor, Thomson Reuters Corp (TRI.TO)TRIL.L, said Bloomberg’s 2007 revenue was about $5.4 billion.

The problem is that most buyers might have eyes that are bigger than their stomachs.

While big media conglomerates would like what analysts said is likely high, steady cash flow and access to an influential news and financial data outlet, few if any of them have the money that it would take to buy the stake, they said.

Some experts and analysts cited General Electric Co (GE.N) with its CNBC business news television channel unit as a possible buyer.

GE and Financial Times publisher Pearson unsuccessfully tried to challenge Murdoch’s bid for Dow Jones, but a source familiar with that attempt said teaming up for the Merrill stake would be unrealistic because it is only for a stake -- not a joint venture they could operate.

Pearson and did not return telephone calls seeking comment. GE and Bloomberg declined comment.


Private equity companies, meanwhile, may not be willing to commit money to a minority stake that likely would not give them enough control over the business, according to two bankers who declined to be identified because they are not authorized to discuss such matters with reporters.

The difficult financing environment due to wider weakness in credit markets also would make it harder for private equity firms to raise the cash to buy the stake, another banker said.

    But private equity firms, with large amounts of cash and few obvious opportunities to deploy it, have been changing their standards when it comes to deals, having recently bought minority stakes in struggling banks like Washington Mutual.


    The most likely buyer might be Michael Bloomberg, or the company itself, a source familiar with the company’s operations said. That would be the easiest and quickest way for Merrill to sell the stake, he added.

    Merrill Lynch thought about selling its Bloomberg stake late last year, but decided to raise equity capital instead.

    This time around, that option might be less palatable: investors who gave money to Merrill in December and January must receive substantial extra compensation if Merrill raises additional capital at too low a price.

    Merrill Chief Executive John Thain said yesterday that he may also be open to selling the company’s stake in money manager BlackRock (BLK.N), a move seen as less likely because the asset manager is more of a main business for Merrill.

    Merrill Lynch’s Thain said on Wednesday that he would consider selling the stake if the company needed to raise capital. He sees Merrill as well capitalized, but facing difficult credit markets. But markets can shift fast, and banks’ capital positions change.

    “Raising more capital is possible now -- I would put it in the more than 50 percent chance territory,” said Lauren Smith, analyst at Keefe, Bruyette & Woods, which rates Merrill “market perform.”

    Additional reporting by Daniel Wilchins, Elinor Comlay and Megan Davies; Editing by Gary Hill

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