DSP Merril Lynch chairman Hemendra Kothari has sold his 10% stake in the company to Bank of America. In a global merger last year, Bank of America took over Merril Lynch for $50 billion. So DSP Merill Lynch in India is now controlled by Bank of America. He has also stepped down as the chairman of DSP Merril Lynch, though he would continue as the non executive chairman of DSP BlackRock Investment Managers, a joint venture between Merrill Lynch and Blackrock in India.
The financial details of the transaction are not available. However, independent calculations put the value of the deal at around Rs 500 crore.
Initially, in 2005, Kothari had sold a 47% stake in DSP Merril Lynch for $500 million to Merrill Lynch. He had retained a 10% stake then.
Kothari would have exercised the put option to sell his residual stake. In December 2005, Kothari fetched Rs 2,270 crore or $500 million ( for his 47% stake). Kothari stands to gain in currency depreciation also. Now Indian rupee is going at Rs 51 while the 2005 deal was done at a time when the rupee was at Rs 45.4 against a dollar.
Now by selling this remaining stake, Kothari has exited DSPML completely. This marks an end of his 25 year old association with the firm. Kothari founded DSP Financial Consultants in 1975 which became DSP Merrill Lynch Ltd in 1995 after a JV was formed between the two with Merrill Lynch holding a small minority interest. Merrill Lynch later increased the stake to 40%, and subsequently to 88% (in 2006) and to 100% now.
Kothari would now focus on the joint venture asset management business- DSP BlackRock, which was formed in January, 2008.
Bank of America is now integrating its operations with DSP Merril Lynch in India. It has also made some top management appointments to head portfolios in the merged entity. Last week, Kaku Nakhate was appointed as the head of global markets for India.