Stan O’Neal was on Friday battling to save his job as chairman and chief executive of Merrill Lynch amid mounting criticism among outside directors of his performance.
The move to oust him is being led by Armando Codina, a Cuban-American businessman close to the family of President George W. Bush, who was angry that Mr O’Neal last week approached Wachovia, the fourth largest US bank, about a possible merger without prior approval from the board, according to people familiar with the situation.
Merrill shares, hit this week after the company announced nearly $8bn of losses on mortgage-backed securities, rose 4 per cent on speculation Mr O’Neal might be ousted and a deal was possible. Despite the scale of the losses, which were almost double the figure Merrill announced less than three weeks ago, Mr O’Neal appeared to have the backing of directors at a meeting last week, according to people briefed on the discussions.
People close to Mr O’Neal say that, until the leak on Wachovia, he had been confident of keeping the board’s support. Aside from Friday’s rally, Merrill’s share price has fallen steadily as analysts have predicted the company could face further heavy losses on its securities holdings in the fourth quarter.
Insiders believe board dissidents could use the Wachovia contacts to press for his removal.
Mr O’Neal approached Wachovia to gauge its interest in a possible deal in order to provide the board with a range of strategic options at its meeting last week, according to people close to the situation. Mr O’Neal and Ken Thompson, chief executive of Wachovia, concluded that a deal would be difficult but possible.
Some directors have now started discussing potential successors, according to insiders. The strongest internal contender has been seen as Greg Fleming, co-president, 44, but many think he is too inexperienced and he may have been damaged by the approach to Wachovia, a long-standing advisory client.
It is thought more likely the board would look outside with names canvassed including John Thain, chief executive of the New York Stock Exchange, and Larry Fink, chief executive of BlackRock, the asset manager in which Merrill has a 49 per cent stake. Most of the board members have been appointed since Mr O’Neal became chairman and chief executive in 2002. The directors include Charles Rossotti, former Commissioner of Internal Revenue, John Finnegan, chief executive of Chubb, the US insurer, Aulana Peters, a former Commissioner of the SEC, and Dame Judith Mayhew Jonas, formerly the City of London’s top administrator.
Wachovia shares rose slightly on the news, valuing the company at $86bn compared with Merrill’s market capitalisation of $54bn. Wachovia has long been seen as a possible partner for a Wall Street bank. But bankers view a deal as highly unlikely.
