Chapter 579 Investing in Merrill Lynch

On December 26, just after Christmas, Merrill Lynch, one of the five largest investment banks on Wall Street, announced that they had just reached an agreement.

Merrill Lynch Group will sell most of its commercial financing business to British Automotive Group for US$1.2 billion. This part of the transaction will be completed in January next year.

After British Automotive Group acquired the commercial financing business of Merrill Lynch Group, it will use this as a basis, plus the related business of each of their previous car brands, to form British Automotive Finance Company to provide its users with car loan-related services.

By selling this part of its business, Merrill Lynch was able to obtain US$1.2 billion in funds that could be reallocated to their other businesses to recover some losses.

Prior to this, according to Merrill Lynch's forecast, their group may once again face billions of dollars in asset writedowns in the fourth quarter.

In order to enrich capital, Merrill Lynch Group not only sold most of their commercial financing business to British Automobile Group, but is also seeking more capital injections.

At this time, those who were in contact with Merrill Lynch Group on this matter, including Li Jiapo's Temasek Investment, Davis Select Consultants, and Caesars Fund under DS Group, were all conducting relevant negotiations with them.

The reason why Barron's will participate in the financing of Merrill Lynch Group at this time is to prepare to enter Merrill Lynch Group in advance, so that after the subprime mortgage crisis completely detonates the American financial industry in the future, he can "share the food" in the future. ” is in a priority position.

Prior to this, Wall Street investment banks, which were struggling with the subprime mortgage crisis, had received multiple capital injections from sovereign wealth funds.

For example, in November this year, the UAE sovereign fund Abu Dhabi Investment Authority invested US$7.5 billion to purchase 4.9% of Citigroup's shares; earlier this month, Li Jiapo Government Investment Company invested 11 billion Swiss francs in Swiss Bank to acquire 9% of the bank. equity; later, China Investment Corporation invested US$5 billion in Morgan Stanley, acquiring no more than 9.9% of the latter's equity.

This time, Caesars Fund is also preparing to inject $5 billion to acquire no more than 10% of Merrill Lynch Group’s shares.

According to Merrill Lynch's announcement, they are preparing to raise a total of no more than US$6.2 billion this time. According to estimates, they may also accrue US$8.6 billion in mortgage-related losses next month.

Through this private placement of common shares, Merrill Lynch will enrich its book value while diluting the rights of its original shareholders by an estimated 13%.

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“We have seen that India has made great progress in the new century and will become one of the world’s most attractive economic engines in the future. This is why I value investment in India so much...”

Barron said this in his speech before Christmas when he visited the Indian Institute of Technology in the ancient city of Kanpur:

“After I arrived in Mumbai before, I could hardly believe my eyes. I never thought that I could see such a modern city in India. In some areas of Mumbai, it even reminded me of Silicon Valley in the United States. Perhaps in the future, It’s going to be something that transcends Silicon Valley and London Tech City, yes, I think so.”

In fact, India's IT industry is indeed developing rapidly. Of course, this is also due to the popularity of English in some aspects - as we all know, India was ruled by the British for nearly 200 years, and before 1965, English was Indian. The only official language.

On the other hand, India's emphasis on science and engineering is another main reason why their IT industry can develop. For example, the Indian Institute of Technology he visited is the best university in India.

Of course, Barron's praise naturally made the Indian students and local media present very happy - to make money, say something nice and not be shabby.

Prior to this, not only Argent Real Estate Group will participate in the construction of some important projects in Mumbai, but also Woaw and Skype will establish their customer service centers in India, taking advantage of India's cheap human resources and relatively excellent labor quality. , to provide customer service to users around the world.

In fact, this is not surprising. Many technology companies will outsource their customer service to Indians. After all, the cost is very low. Even if the local English has a bit of curry flavor, it is not to the point of being incomprehensible. …

In addition, O2 Telecom will also cooperate with Reliance Information and Communications Company, a subsidiary of Reliance Group, to establish O2 Reliance Telecommunications Company. Both parties will hold 50% of the shares to provide telecommunications services such as mobile communications and broadband in India.

Reliance Consulting Communications was just established this year. Compared with operators such as Vodafone-Idea and Tata Telecom, which have a higher market share in India, there is a huge gap.

However, Mukesh Ambani of Reliance Group is still very ambitious in the telecommunications industry. Therefore, after cooperating with Barron, the two parties hit it off and facilitated the cooperation between O2 Telecom and Reliance Communications.

For well-known reasons, it is safest to cooperate with local giants in India. For example, Vodafone Creative, which currently has the largest share of the Indian telecom market, is a joint venture between Vodafone and Creative.

India has a large population and the telecommunications industry will have a very large market. It is very worthwhile to enter this market.

In addition, this cooperation will also allow Honor Electronics' affordable brand Dopod mobile phones to gain access to the Indian market, which can be said to be killing two birds with one stone.

In other words, it is not just killing two birds with one stone. After O2 Reliance Telecom has developed in India, it can also introduce the online video platform DailyVedio.com into the Indian market.

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On December 31, before the arrival of 2008, Merrill Lynch Group announced that it had finally selected Caesars Group and Davis Select Consultants, a subsidiary of DS Group, as their investors.

Among them, Caesars Fund will invest US$5 billion to inject capital into Merrill Lynch Group.

Through this capital injection, Caesars Fund will purchase $5 billion worth of Merrill Lynch Group shares at a price of $48. This price is a 13.6% discount to Merrill Lynch Group’s closing price last week. At this point, Caesars Fund will hold 9.9% of Merrill Lynch Group.

In addition, New York-based Davis Select Advisors will purchase $1.2 billion of Merrill Lynch's common stock for long-term investment.

At the same time, Merrill Lynch Group also claimed that after holding 9.9% of the group's shares, Caesar Fund will be allowed to send a representative to their board of directors and have 1 voting right in the board of directors' voting.

After this capital injection, Merrill Lynch's share price rose slightly.

The equity of the original shareholders of their group will be diluted by about 13% by the newly issued ordinary shares.