It doesn’t take a $1,500 (Rs64,170) a month Bloomberg terminal to figure out there’s a new “richest kid on the block”. Merrill Lynch and Co. Inc.’s sale of its 20% stake in the financial news and data provider bearing his name makes Michael Bloomberg the richest man in Manhattan.
That he also happens to be the city’s chief executive is perhaps coincidental.
Wait, though, how can mayor Bloomberg snag that superlative if Merrill’s stake is only worth $4.4 billion? That values Bloomberg Lp. at $22 billion. That means the mayor’s stake is worth about $15 billion.
Even tossing in Bloomberg’s townhouses in London and New York, spreads in Bermuda and Westchester, plus pocket change, he’s still behind David Koch, the industrialist whose assets Forbes lists at $17 billion.
But the price Merrill’s stake fetched may not reflect the true value of Bloomberg’s business. After all, Merrill was a distressed seller. And since a 20% slice offered no control over the company, it’s hard to believe there was a heated auction among the few media concerns with the desire, or firepower, to own Bloomberg.
Then, there are the market conditions. The company had one of its worst months in terms of net terminal installations recently. Its core clients in financial services are bleeding. This is a terrible time to value financial information assets. Shares of rival Thomson Reuters illustrate the point: they’ve fallen some 40% in the past year.
So what’s the right value of Bloomberg Lp., then, if not $22 billion?
Well, assume markets stabilize and financial data company valuations—as reflected by Thomson Reuters—retrace half the ground they’ve lost over the past year. On that basis, the entire equity of Bloomberg would be worth about $29 billion.
There could be more. If Bloomberg sold the business, he would naturally seek a control premium. According to data collected on Bloomberg’s very own terminals, the average premium so far this year paid in takeovers is about 35%. Apply that and, presto, Bloomberg could fetch up to $40 billion. Subtract the loan Merrill extended him to buy its stake and the mayor becomes Manhattan’s first $30 billion man.