Mike Mayo on Merrill Lynch

Mike Mayo on Merrill Lynch Tuesday, October 30, 2007

Posted by ei-forum in US Traded Stocks.
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Anyone who followed the conference call already knows the case put forwards by Mike Mayo from Deutsche Bank and the the tough questions he had for CEO Stan O’Neal. However, for those who missed it, we would like to summarize Mayo’s take on Merrill (MER).

Mayo highlights that 7/8th of the company is performing extremely well and that the 3 main tasks ahead are:

Getting the numbers right.
Regaining trust and credibility.
Corrective action.

Fairly obvious one would think but what we found interesting, is his case for Merrill’s stock being worth over 100 USD – possibly up to 120USD, in the event of a take over.

Merrill Lynch owns a 20% stake in Bloomberg and a a 49% stake in BlackRock. The estimated sum of the parts is 1/4th more than the current market cap. Basically at current prices, you would be getting the whole brokerage business for free.

The stock price has recently gone up in light of O’Neal being replaced and Mayo’s comments. We feel that, in light of recent news and confusion with the board, the stock might drop back down due to panic and confusion about leadership and this dip could present and interesting buying opportunity for the long-term investor.

CNBC video link: here.

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