Merrill Lynch may get $5 billion investment from Temasek, WSJ says

Kelly Riddell and Jean Chua
21 Dec 07

Merrill Lynch & Co. may get as much as a $5 billion cash infusion from Singaporean investment fund Temasek Holdings Pte., the Wall Street Journal reported, citing unidentified people familiar with the matter.

State-owned Temasek is in advanced talks with Merrill about an investment, the Journal said. Temasek’s board has given preliminary approval on the deal, although pricing, timing and regulatory issues need to be negotiated, the Journal reported.

Governments in the Middle East and Asia have invested about $25 billion in Wall Street firms, helping prop up balance sheets battered by writedowns stemming from the collapse of the subprime mortgage market. Temasek would become the second Singapore sovereign wealth fund this month to invest in a global bank amid the crisis, following the Government of Singapore Investment Corp.

Temasek “may feel there are bargains out there,” said David Cohen, an economist at Action Economics in Singapore. “It’s a sign of diversification. They can write big checks and these banks appreciate that.”

Rob Stewart, a Hong Kong-based spokesman for Merrill, declined to comment. Temasek, the biggest shareholder of Standard Chartered Plc and DBS Group Holdings Ltd., also declined to comment.

The news comes amid analysts’ predictions that Merrill may face an additional $8 billion or more in mortgage writedowns in the fourth quarter, the Journal said.

New York-based Citigroup Inc., the biggest U.S. bank by assets, said Nov. 27 that Abu Dhabi invested $7.5 billion. State- controlled China Investment Corp. is buying an almost 10 percent stake in Morgan Stanley for $5 billion after the second-biggest U.S. securities firm reported a loss of $9.4 billion from mortgage-related holdings on Dec. 19.

Temasek manages more than $100 billion of assets, including controlling stakes in seven of Singapore’s 10 biggest companies by market value.

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