Merrill’s $6bn private equity arm in limbo

As part of a frantic weekend on Wall Street, Bank of America has agreed to acquire Merrill Lynch. A spokesman said it is ‘too early’ to tell whether the deal will include the investment bank’s private equity portfolio, or if it will spin out as an independent firm, as did Bear Stearns Merchant Banking.

The $50 billion (€35 billion) sale of US investment bank Merrill Lynch to Bank of America, expected to complete in early 2009, leaves unanswered questions for Merrill’s global private equity portfolio, thought to be worth between $5 billion and $6 billion.
As well as accelerating its growth in equities, equity capital markets and merger and acquisitions advisory businesses, Bank of America could potentially take ownership of Merrill Lynch Private Equity, whose 70 investment professionals operating in seven countries typically agree deals ranging in size from $250 million to $750 million.

Merrill Lynch Private Equity is currently raising a $6 billion fund, The Wall Street Journal reported in August.
When Bear Stearns, Wall Street’s first big casualty of the subprime crisis, was bought by JPMorgan in March, its London-listed fund of funds vehicle was rebranded as JPMorgan Private Equity, but it core private equity arm, Bear Stearns Merchant Banking, said it would spin out to become an independent firm.
A spokesman for Merrill Lynch said it was too early to speculate on plans for individual parts of the business. More details are to be revealed at press conference later today.
MLPE’s portfolio includes UK dental care group Integrated Dental Holdings, which it acquired for around £300 million in February this year, and French electrical retailer Rexel.
Merrill Lynch Private Equity was one of three private equity groups behind the controversial buyout of British department store group Debenhams. The trio of MLPE, TPG and CVC Capital floated the group in 2006 making more than three times their collective investment of £600 million equity.
In March, MLPE sold its remaining stake in Debenhams at a price of 60 pence, after the firm had floated at 195 pence.
Merrill’s former captive private equity arm, Mercury Private Equity, spun out from the business in 2000 and was renamed HgCapital.
In autumn 2007, Merrill Lynch held talks with TPG to discuss a possible capital injection into the bank. Eventually the bank received $12.2 billion in funding from a consortium of investors including Mizuho, the Japanese bank, Korea Investment Corportation, the South Korean sovereign fund and TPG-Axon Capital, a TPG affiliate.