With O'Neal out, Merrill starts search for a CEO

October 31, 2007|Joe Bel Bruno, Associated Press

NEW YORK - The unfolding credit crisis has claimed its biggest corporate casualty so far: Merrill Lynch chief executive Stanley O'Neal.

The announcement of his departure yesterday came after the world's largest brokerage posted a $2.24 billion quarterly loss, its biggest since being founded 93 years ago. Merrill Lynch did not name a replacement for O'Neal, whose ouster had been expected, and who leaves the company with benefits worth $161.5 million.

Laurence Fink, chief executive of investment manager BlackRock Inc., turned down an initial overture from Merrill's board but is in active negotiations, according to a person with direct knowledge of the offer who was not authorized to speak publicly. With the presumed front-runner out of contention, filling the top spot at Merrill Lynch is not expected to be easy given the remaining unknowns from the global credit crisis.

Any replacement will face the daunting task of cleaning up investments in subprime mortgages and other risky types of debt, and rebuilding an investment house badly bruised.

There is speculation by many analysts that Merrill Lynch faces a $4 billion writedown during the fourth quarter. This would be on top of a $7.9 billion charge taken last quarter, a stunning amount since Merrill originally said it would write down only $4.5 billion because of credit market turmoil.

O'Neal was also criticized for reportedly approaching Wachovia Corp. about some kind of merger without the approval of his board.

"These losses, coupled with rumors that O'Neal had proposed a merger with Wachovia without the board's approval, essentially dug O'Neal's grave," said Morningstar analyst Ryan Lentell. "The new CEO's first priority must be to ensure proper risk management procedures are in place to prevent a recurrence of the quarter's loss."

O'Neal, 56, accepted blame for the losses. The mistake would prove to be his last, ending a career that spanned more than two decades at Merrill.

He was one of the highest-ranking blacks on Wall Street - a stunning climb from his impoverished roots in Alabama as the grandson of a former slave.

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