Dick Bove: Goldman Sachs Could Takeover MF Global
By: According to widely followed analyst Dick Bove, don't be surprised to hear that CEO Jon Corzine has engineered a deal to sell his firm, MF Global, to his former employer, Goldman Sachs.
As you likely know MF Global has landed in the spotlight after Moody's, cut its credit rating on the firm to one notch above junk status, citing an increased appetite for risk-taking and exposure to European sovereign debt.
The commentary from Moody’s combined with a surprise loss reported Tuesday sent investors running for the exits with the stock tumbling more than 50% in a matter of days.
And that's triggered chatter far and wide that MF Global is in trouble, though the firm insists its financial position remains strong.
”I wouldn’t buy the stock,” Bove tells us, “I don’t think Goldman will pay a premium.”
However he does think Goldman could be interested in MF’s assets because he expects the firm will have to sell them at a steep discount.
”I think Goldman asks themselves, should we pick off the assets as they sell them – or should we buy the whole company get all the assets.”
Bove says if Goldman holds the assets abd then re-sells them in the future, they’ll probably turn a handsome profit.
As an example he says, “The company has $6.2 billion in European debt on its balance sheet and more than half of that is from Italy. If my view is correct purchasing those bonds at a significant discount is not the wrong thing to do.”
Bove's comments follow a report in the Wall Street Journal that suggests the company is looking to sell itself. According to the paper, MF Global Holdings has hired at least two investment banks to review its strategic options.
*After the broadcast Diana DeSocio of MF Global contacted us and asked us to add the text you see below in itallics explaining that the bonds referenced by Dick Bove above were not in fact on the balance sheet. She writes:
"These positions are not on the firm’s balance sheet. They are repo and reverse repo agreements to maturity, short-term in nature and the majority are cleared through a central clearing house. The only risk of loss is upon default of the issuer of the underlying securities."
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