Merrill deal may ease Temasek pain, but risk remains

lunes 15 de septiembre de 2008 12:35 CEST

By Saeed Azhar

SINGAPORE, Sept 15 (Reuters) - Bank of America's purchase of Merrill Lynch in a $50 billion deal highlights the risk Singapore's Temasek [TEM.UL] and other sovereign funds took in betting on a financial sector whose troubles are far from over.

The $131 billion Singapore state fund has ploughed over $5 billion into Merrill, but the value of the investment plunged when the U.S. bank suffered massive losses from risky housing debt, before Merrill agreed to halve Temasek's purchase price in July.

With an average price of between $23 and $24 paid per Merrill MER.N share, Temasek could make a small paper gain given Bank of America (BAC.N: Cotización) is paying $29 a share in an all-stock deal for the third-biggest global investment bank.

Temasek will end up owning shares in Bank of America, a bank with a much bigger franchise but with the challenge of integration and dealing with Merrill's bad debts. Analysts said it was unclear if Temasek will sell or hold for the long-term.

"If you are a long-term investor and have a five- to 10-year horizon, then whether you make a profit or a loss on Bank of America's share price shouldn't be an issue for you now," an analyst, familiar with the workings of the fund, told Reuters.

A Temasek spokesman declined to comment on the sovereign fund's next move.

A second source with knowledge of the fund said Temasek is waiting for more clarity from Merrill CEO John Thain on a investor conference call later on Monday.

In Dubai, state-owned investment agency Mubadala said it was not looking to bail out any financial companies in difficulty.   Continuación...