Merrill profits from Singapore chipmaker's IBM tie-up

Merrill Lynch appears to have pocketed a gain of at least S$25 million (about HK$110.5 million) as it pared down its unwanted stake in chipmaker Chartered Semiconductor Manufacturing after the company's shares rallied this week on news of a tie-up with IBM.

The US investment bank was last month obliged to take an 11 per cent stake in the state-linked Singapore business after a S$1-a-share rights issue it underwrote failed to be fully taken up.

The seemingly botched deal left some analysts dubbing the firm 'Merrill Lynched'. But now it appears that the team at the 'Thundering Herd' may just have the final laugh.

Dealers in Singapore said yesterday Merrill Lynch sold a block of 212 million shares in Chartered Semiconductor, or 8.5 per cent of the firm, at S$1.12 a share. That is S$25.44 million more than they cost Merrill Lynch.

Officials at Merrill Lynch declined to comment. Major shareholders in Singapore companies have 48 hours to declare to the exchange any change in their stakes, suggesting that an announcement from Merrill may come on Monday.

Stock in Chartered Semiconductor had sunk as low as 86 cents after the rights issue amid continued investor gloom about its seven successive quarters of losses and pessimism about the chip sector's outlook.

Chartered Semiconductor - the world's third-largest contract chipmaker - was seen lagging far behind its larger Taiwanese rivals Taiwan Semiconductor Manufacturing and United Microelectronics, which dominate the market.