JOHN THAIN was ousted from Bank of America yesterday, just three weeks after closing the sale of Merrill Lynch to BofA, in a sign of the deepening crisis surrounding the deal.
Mr Thain, who was named chief executive of Merrill 13 months ago following the ousting of Stan O’Neal, left BofA after a brief meeting with its chief executive, Ken Lewis, who is under pressure from shareholders for paying a premium for Merrill.
Since the deal was announced on September 15th, Merrill has disclosed operating losses of $41.2 billion for 2008, and BofA’s share price has dropped about 80 per cent.
Mr Lewis flew to New York from his bank’s headquarters in Charlotte, North Carolina, for a face-to-face showdown at 11:30am at Merrill’s offices in lower Manhattan. According to a person familiar with the matter, Mr Lewis believes Mr Thain had lost the confidence of many of the combined firm’s employees and shareholders. Mr Thain was not available for comment.
Mr Thain’s ousting, described by BofA as mutually agreed, came after rising tensions that followed the revelation last week of Merrill’s $15 billion loss in the fourth quarter. BofA said Mr Lewis learned of the losses after shareholders approved the deal in December, and subsequently sought government aid to close the purchase. He ultimately secured another $20 billion in federal money. Shareholders have sued BofA alleging the bank did not disclose material information prior to completion of the acquisition.
Executives at both companies have said tension between Mr Lewis and Mr Thain had been growing for months. But spokespeople for BofA and Merrill have denied such tension. As recently as last week, Mr Lewis told analysts “we are happy that John Thain has assumed a major role” at BofA.
Evidence of the rift between the two men spilled out into the open on Wednesday when it was reported that Merrill Lynch had accelerated its bonus payment plan for 2008, and doled out as much as $4 billion in discretionary bonuses on December 29th, just three days before the BofA acquisition was completed.
A BofA statement confirming the payments singled out Mr Thain by name, saying he had decided to pay the bonuses a month early. It said BofA “was informed of his decision”.
Sources said Mr Thain’s departure raised questions over the role of Tom Montag, who was hired last year by Merrill Lynch with a $39 million compensation package. Mr Montag heads BofA’s sales and trading operations. He is the last remaining senior executive from the Merrill side.
( Financial Timesservice)
