Sovereign wealth funds: Still an appetite for US financial institutions?

Posted Jul 21st 2008 1:51PM by Tom Taulli
Filed under: Deals, Merrill Lynch (MER)

So far, sovereign wealth funds have had bad luck with investments in U.S. financial institutions such as with Citigroup (NYSE: C) and Merrill Lynch (NYSE: MER).

Despite this, there still may be interest in dealmaking. Just take a look at the situation with Merrill Lynch. There was talk that the troubled firm would unload its 49.8% stake in BlackRock Inc (NYSE: BLK), and apparently there was interest from sovereign wealth funds, according to the Financial Times.

The potential suitors: Kuwait Investment Authority and Temasek (Singapore).

However, one issue was valuation. Why sell when the markets are in dire straights?

But there were some other key considerations. For example, BlackRock has been able to escape much of the turbulence from the credit crunch. More importantly, the firm has a lot of growth potential in global markets.

BlackRock must give consent for a sale -- at least for the next 14 months. So, in the end, it has a lot of power in the situation.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

Tags: BlackRock, inthenews, mer, merrill lynch, MerrillLynch, sovereign wealth funds, SovereignWealthFunds