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Merrill Lynch & Co., Inc. : First Republic Bank Summary: According to the complaint, the Plaintiff brings this action as a class action, on behalf of himself and all others who exchanged securities of First Republic Bank for securities of Merrill Lynch in connection with the merger as described below.
In late 2006 and early 2007, Merrill Lynch approached First Republic bank about a possible merger. On January 29, 2007, after a period of negotiations, Merrill Lynch announced that it had reached an agreement to acquire First Republic, subject to shareholder approval, for a total transaction value of $1.8 billion. Under the agreement, First Republic shareholders would receive at their election, cash or Merrill Lynch common stock having a value of equal to $55.00 for each share of First Republic common stock owned at the completion of the Merger. The aggregate consideration would be paid with 50% cash and 50% Merrill Lynch common stock.
To obtain approval from First Republic’s shareholder, Merrill Lynch filed the Registration Statement dated May 8, 2007, as amended on June 8, 2007 and June 21, 2007, which became effective on June 22, 2007, and the Proxy Statement and Prospectus dated June 22, 2007.
Unfortunately, the Registration Statement and Proxy/Prospectus were materially false and misleading because, inter alia, they: a. failed to disclose and hid the fact that Merrill Lynch was overexposed to risky subprime loans, to the sum of billions of dollars; b. failed to disclose and hid the fact that Merrill Lynch had begun to accumulate a massive directional position in one of the riskiest types of collateralized debt obligations (CDOS), ABS CDOs; c. failed to disclose the risks of these CDOs, including the belief of Merrill Lynch’s own credit analysts that ABS CDOs were structurally deficient and would suffer in price as the underlying collateral deteriorated; and d. failed to disclose and hid the fact that Merrill Lynch did not properly value the CDO positions on its balance sheet.
After receiving approval from the First Republic shareholders, the Merger was completed on September 21, 2007. However, just weeks after the Merger was completed, and contrary to the representations in the Registration Statement and Proxy/Prospectus, and the oral communications made in the conference call of July 17, 2007, Merrill Lynch’s true exposure to subprime loans and CDOs began to emerge.
On October 24, 2007, before the market opened, Defendants issued a press release acknowledging that Merrill Lynch’s third quarter writedown for CDO and subprime lending losses had ballooned to $7.9 billion.
On November 2, 2007, The Wall Street Journal ran an article indicating that Merrill Lynch’s exposure to CDOs was even greater than Defendants had acknowledged, noting that Merrill Lynch would likely take an additional $4 billion in writedowns in the fourth quarter related to its CDO portfolio. The article also stated that the SEC had started an informal inquiry into how the company had marked its mortgage securities and whether it had lied to investors regarding the size of its positions. That same day, Deutsche Bank AG analyst Michael Mayo issued a research note stating that Merrill Lynch may have to take an additional $10 billion in writedowns related to its CDO and subprime exposure.
The news was devastating to First Republic’s former shareholders, who had just exchanged their valuable shares for Merrill Lynch stock. Based on the September 21, 2007, closing date, Merrill Lynch stock was trading at approximately $75.00 per share. Thus, First Republic shareholders received approximately 0.7332 shares of Merrill Lynch stock for each share of First Republic stock. However, by November 2, 2007, after Merrill Lynch’s massive CDO exposure had been revealed, the Merrill Lynch shares obtained through the Merger had plummeted to $57.28, a 23% drop, and are presently trading at less than $55.00 per share.
INDUSTRY CLASSIFICATION:
SIC Code: 6211
Sector: Financial
Industry: Investment Services
| COMPANY/ISSUER NAME: | Merrill Lynch & Co., Inc. |
| COMPANY/ISSUER TICKER: | MER |
| COMPANY WEBSITE: | http://www.ml.com |
| FIRST IDENTIFIED COMPLAINT IN THE DATABASE | |||||||||||||||||
| James Conn, et al. v. Merrill Lynch & Co., Inc., et al. | |||||||||||||||||
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| DOCUMENTS FOR THE FIRST IDENTIFIED COMPLAINT | |||
| Class Action Complaint for Violation of Federal Securities Laws - Jury Trial Demanded | |||
| Type: Complaint | Date on the document: 12/28/2007 | ||
| OTHER DOCUMENTS | |||
| Case Name and/or Number: | |||
| Type: | Date on the document: | ||
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