MutualFundWire.com: Three Suitors Reportedly Circle Columbia

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Monday, May 11, 2009

Three Suitors Reportedly Circle Columbia

BlackRock, Franklin Resources and Federated Investors Inc have made preliminary offers to purchase Bank of America's Columbia Management, Bloomberg reported last week.

BofA owns 49.5 percent of BlackRock through the bank's acquisition of Merrill Lynch.

The Bloomberg article was published late Wednesday, a day before the Federal Reserve released stress test results for 19 banks. In BofA's case, test results showed that the bank would need to increase Tier 1 common capital by $33.9 billion for it to weather two years of the most severe economic circumstance.

The day the test results came out, BofA executives said they could hike the common ratio by selling common stock and/or converting existing privately held preferred stock into common shares, selling assets and considering joint ventures.

Below is an excerpt from BofA's May 7 press release quoting chief financial officer Michael Price:

Price said that the company could increase the Tier 1 common ratio in a number of ways. He said the company intends to sell common stock and/or convert existing privately held preferred stock into common shares. Bank of America has already announced it will sell First Republic Bank and is considering the sale of several other business units including Columbia Management. It may also consider several joint ventures.

"Our intention will be to reach the government's target on our own without exchanging any of the current U.S. investment in Bank of America into mandatory convertible preferred stock," Price said. "That would allow us to minimize the use of government money and put us into a position to repay the government's investment sooner."