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Merrill in Talks to Sell Another Big Stake: Report

Merrill Lynchis in talks with Chinese and Middle Eastern government-sponsored investment funds which could lead to the sale of another big stake in the U.S. brokerage, according to a media report.

John Thain, the brokerage's new chief executive, is in discussions to bolster the company's capital base through further investments by sovereign wealth funds, Britain's The Observer reported Sunday. This would add to last week's deal to sell up to $6.2 billion in shares to Singapore’s Temasek and asset manager Davis Selected Advisers.

A spokeswoman for Merrill Lynch declined to comment on speculation about another capital infusion.

The report, which cited unnamed sources, warned the latest investment still won't be enough to shore up Merrill's books amid further writedowns.

Merrill Lynch reported writedowns of $8.4 billion in the third quarter because of bad bets on mortgage-backed securities. Analysts expect a further $10 billion in charges when it posts fourth-quarter results in January.

Global banks and investment houses have written down about $105 billion this year due to the global credit crisis. In the meantime, U.S. banks have secured about $30 billion worth of capital from foreign-controlled investment funds.

Since taking over as CEO in November after the ouster of Stan O'Neal, Thain has expressed interest in selling non-core assets to help streamline the business. As part of that makeover, Merrill agreed last week to sell its commercial finance business to GE Capital in a deal to free up $1.3 billion for other parts of the business.

The company also hasn't ruled out the possibility of future investments, as needed, throughout 2008.

Shares of Merrill fell Monday. The stock is down 46 percent from its 52-week high of $97.68 reached on Jan. 24.