It doesn't look good that O'Neal was allegedly raising the possibility of a sale at a time when the brokerage was about to report over $8.3 billion of losses in its fixed income business. It doesn't make sense to sell out in the midst of bad news. Unless, of course, more bad news is on the way.
Eavis also points out that the shortlist of potential saviors in terms of banks who might be interested in buying Merrill (MER) is very small. Wachovia (NASDAQ:WB) just isn't set up to run an investment bank, Bank of America (NYSE:BAC) hates investment banking, and Citigroup (NYSE:C) has problems of its own. Concludes Eavis:
That effectively leaves JP Morgan Chase(NYSE:JPM) in the U.S. and a handful of large foreign banks. And even these might want to make sure they navigate their ways through the credit crunch before making a big purchase, like Merrill.
Historically there's been no shortage of large European commercial banks who are willing to spend untold billions trying (and usually failing) to get themselves a strong investment-banking franchise in the US. So maybe someone like Barclays (NYSE:BCS), having lost out on ABN Amro (ABN), might take a stab at buying Merrill. But it's still probably more likely that some kind of sovereign wealth fund or Chinese bank will inject a bunch of capital in return for a minority equity stake.