Merrill Lynch
From Taighde
Three Sovereign wealth funds have invested in Merrill Lynch. The first, Temasek Holding invested over $5 billion in three infusions. The first infusion occurred on December 24, 2007 and the second infusion by Temasek occurred in February 2008.
The Korea Investment Corporation and the Kuwait Investment Authority both invested in the bank on January 15, 2008.
Temasek Holdings
On December 24, 2007, it was announced that Temasek Holdings would take a 9.4% stake in Merrill Lynch for $4.4 billion. Temasek purchased 91,666,666 shares of common stock at $48 per share. It had an option to buy another 12,500,000 shares and did so in February 2008. Temasek increased their stake in September 2008 to 13.7% with 219,695,826 total shares.
January 15 investment
On 1/15/08, Merrill Lynch announced that it raised $6.6bn for the sale of preferred stock. Two Sovereign Wealth Funds were involved in this deal: Korea Investment Corporation and the Kuwait Investment Authority. The KIC bought $2bn. KIA bought around $2.4 Billion.
Preferred Stock Terms
| Security | Non Voting Mandatory Convertible Non-Cumulative Preferred Stock, Series 1 |
| Issuer | Merrill Lynch & Co., Inc. or the “Company” |
| Dividend | 9% per annum |
| Reference Stock Price | $52.40 (equal to the 3-day average closing price per share of the Company’s common stock ending on Friday, January 11, 2008). |
| Conversion Premium | 17% |
| Maturity | 2 ¾ years |
| Liquidation Preference | $100,000 per share |
| Mandatory Conversion at Maturity (Shares per Security) | • If the Company’s share price is below 100% of the Reference Stock Price (the “Minimum Conversion Price,”) the Liquidation Preference divided by the Minimum Conversion Price.
• If the Company’s share price is above 117% of the Reference Stock Price (the “Maximum Conversion Price”), the Liquidation Preference divided by the Maximum Conversion Price. •If the Company’s share price is between the Minimum Conversion Price and the Maximum Conversion Price, the Liquidation Preference divided by the Company’s share price. |
| Lock-Up | Investors are not permitted to sell, transfer or hedge, directly or indirectly, their preferred stock (or underlying common stock) at any time during the one-year period following the closing. |
| Standstill | Customary two-year standstill that includes, among other things, a prohibition on (i) acquisitions of additional voting securities (or securities convertible into voting securities) that would cause an investor to own more than 9.9% of the Company’s outstanding common stock (or securities convertible into common stock), (ii) proposals to acquire the Company or (iii) otherwise seeking to influence or control the Company. |
| Price “Reset” | Subject to certain conditions and exceptions, if the Company sells or agrees to sell more than $1bn of any common stock (or equity securities convertible into common stock) within one year of closing at a purchase, conversion or reference price per share less than $52.40, then the conversion ratio for the preferred stock shall be adjusted to compensate the investor on a “full-ratchet” basis. |
| Preemptive Rights | Subject to certain conditions and exceptions, if the Company offers to sell common stock (or securities convertible into common stock) in a public or private offering, each investor shall have the right to acquire from the Company, for the same price and on the same terms as such securities are offered, in the aggregate up to the amount of such securities required to enable the investor to maintain its then-current ownership interest in the Company’s common stock. The investors do not have these preemptive rights until the aggregate gross proceeds of such offerings by the Company exceeds $1billion.
Each investor’s preemptive rights terminate upon the earlier of: (i) the conversion of the investor’s preferred stock into common stock, and (ii) such time as the investor no longer owns at least 75% of the preferred stock it purchased, including as a result of hedging transactions. |
| Registration | Customary registration rights. |
| Antidilution | Customary antidilution protection. |
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