October 2, 2008 / 7:02 PM / 11 years ago

UPDATE 3-Thain to head investment banking, wealth at BofA

(Adds closing share prices, deal spread)

By Elinor Comlay

NEW YORK, Oct 2 (Reuters) - John Thain, the Merrill Lynch & Co Inc chief executive who engineered the firm’s sale to Bank of America Corp, will head investment banking, securities and wealth management at the new company — at least for now.

But analysts don’t expect Thain, who has now led two major Wall Street companies, to remain in his new job for long. They expect him to aim to succeed Bank of America (BAC.N) Chief Executive Ken Lewis, 61, or seek a CEO job elsewhere.

“The fact is that he’s a CEO — he’s not going to stay long,” said Greg Donaldson, director of portfolio strategy at Donaldson Capital Management in Evansville, Indiana.

Thain, 53, was previously CEO at NYSE Euronext Inc NYX.N and before that was president and chief operating officer at Goldman Sachs Group Inc (GS.N).

A Merrill MER.N spokeswoman declined comment on the announcement on Thursday.

Jim Mahoney, a spokesman for Bank of America, said the bank expects Thain to be a “strong contributor” to the executive management team. “The issue of succession was not central to his conversations with (CEO Ken) Lewis,” he added.

Thain joined Merrill in December after the ouster of former CEO Stan O’Neal and was brought in to repair the financial service group after it wrote down $8.4 billion in soured mortgage securities in the third quarter of last year.

He has presided over substantial write-downs. Merrill’s total tally is over $20 billion for this year, including a $5.7 billion write-down in the third quarter that was announced in July. Merrill’s troubles stem from aggressive risk-taking in complex securities during O’Neal’s tenure as CEO.

MASTER STROKE?

Many Merrill investors see Thain’s shepherding of the proposed sale to Bank of America as a master stroke that may have saved it from a worse fate. Bank of America had considered acquiring Lehman Brothers Holdings Inc LEHMQ.PK, which later filed for bankruptcy protection.

Thain also avoided being forced to sell the investment bank at a fire-sale price, as happened to Alan Schwartz, who was CEO at Bear Stearns when JPMorgan Chase & Co (JPM.N) bought Bear in March, although the sale price was still at a discount to Merrill’s share price just two months ago.

JPMorgan offered Schwartz a job as a senior dealmaker at the bank, but he chose to leave.

As part of the announcement on Thursday, Lewis said Brian Moynihan, president of global corporate and investment banking at Bank of America, will stay in that role until the acquisition goes through in the first quarter, when he will take a new role as president of private equity and global operations.

Moynihan also will be responsible for ensuring the acquisition process goes smoothly and will work with Tom Sanzone, Merrill’s chief administrative officer.

Shares in Bank of America closed down 4.62 percent at $36.37 on Thursday, while shares in Merrill Lynch were 2.62 percent higher at $27.40. The gap between Merrill Lynch’s share price and the price implied by the deal narrowed to 12 percent from 18 percent on Wednesday, suggesting investors now have greater confidence the deal will go through.

“(The announcement) puts a little more peace in the valley for Merrill employees ... and gives a little more credibility to the combined Merrill/Bank of America entity,” said Donaldson. (Reporting by Elinor Comlay; Editing by Steve Orlofsky/Jeffrey Benkoe)

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