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Merrill investment banking chief Zakaria to leave
New York, Aug 07: Merrill Lynch & Co. on Wednesday said its global markets and investment banking chief, Arshad Zakaria, will leave the firm at the end of the year, eight days after his staunch supporter for a wider role at the company was ousted.
New York, Aug 07: Merrill Lynch & Co. on Wednesday said its global markets and investment banking chief, Arshad Zakaria, will leave the firm at the end of the year, eight days after his staunch supporter for a wider role at the company was ousted.
Arshad Zakaria, who became sole head of Merrill's Global Markets and Investment Banking unit about six months ago, was widely expected to leave the firm following the forced departure of Executive Vice Chairman Thomas Patrick on July 29.
Patrick's sudden departure came after he lobbied for Zakaria to be named Merrill's president against Chief Executive Stanley O'Neal's wishes.
Merrill named Greg Fleming, co-head of its financial institutions banking group, and Dow Kim, head of global debt markets, as co-heads of Global Markets and Investment Banking, effective immediately. Zakaria, 42, will now assume a new role as chairman of the unit until he leaves, Merrill said.
"It doesn't look clean," said Thomas Giles, chief investment officer at Dean Investment Associates, which oversees about $600 million but does not own Merrill stock. "It always looks bad when you have these rather unceremonious departures."
If Zakaria had been named president -- a post O'Neal still holds -- he would have been next in line as CEO. But O'Neal did not want an extra layer between himself and the heads of Merrill's three main divisions, according to a person familiar with the matter. Undeterred, Patrick advocated naming Zakaria as president at a board meeting late last month.
Zakaria, a protege of Patrick, was put in a difficult position when O'Neal forced Patrick to leave Merrill. Zakaria and Patrick are known to be close friends and once worked together on sophisticated tax shelters for corporate clients.
Drugmaker Schering-Plough Corp. was one of the first companies to avail itself of the sophisticated tax strategy, and it saved millions of dollars in capital gains taxes by doing so.
Richard Luciano, whose father Robert Luciano sits on Merrill's board and is a former chairman of Schering-Plough, also worked on Merrill's tax team. With other companies such as Allied-Signal and Colgate-Palmolive Co. as clients, the tax schemes brought more than $20 million a year in fees to Merrill. The Internal Revenue Service later pulled the plug on the strategy, however.
Zakaria, also a member of Merrill's operating committee, is a Harvard-trained math whiz who joined Merrill's investment banking unit in 1987. He was named managing director in 1991, and from May 2000 to October 2001, he was head of corporate risk management.
Zakaria's division helped power Merrill to its second-best quarter ever last month, accounting for 55 per cent of the New York company's $5.3 billion in revenue.
As co-heads, Fleming, 40, will be responsible for all origination activities, including global investment banking, while Kim, also 40, will be responsible for the global debt and equity businesses, Merrill said.
Shares of Merrill Lynch closed down a penny at $51.25 on the New York Stock Exchange Wednesday, just below a 52-week high of $54.96 reached July 31.
Patrick's sudden departure came after he lobbied for Zakaria to be named Merrill's president against Chief Executive Stanley O'Neal's wishes.
Merrill named Greg Fleming, co-head of its financial institutions banking group, and Dow Kim, head of global debt markets, as co-heads of Global Markets and Investment Banking, effective immediately. Zakaria, 42, will now assume a new role as chairman of the unit until he leaves, Merrill said.
"It doesn't look clean," said Thomas Giles, chief investment officer at Dean Investment Associates, which oversees about $600 million but does not own Merrill stock. "It always looks bad when you have these rather unceremonious departures."
If Zakaria had been named president -- a post O'Neal still holds -- he would have been next in line as CEO. But O'Neal did not want an extra layer between himself and the heads of Merrill's three main divisions, according to a person familiar with the matter. Undeterred, Patrick advocated naming Zakaria as president at a board meeting late last month.
Zakaria, a protege of Patrick, was put in a difficult position when O'Neal forced Patrick to leave Merrill. Zakaria and Patrick are known to be close friends and once worked together on sophisticated tax shelters for corporate clients.
Drugmaker Schering-Plough Corp. was one of the first companies to avail itself of the sophisticated tax strategy, and it saved millions of dollars in capital gains taxes by doing so.
Richard Luciano, whose father Robert Luciano sits on Merrill's board and is a former chairman of Schering-Plough, also worked on Merrill's tax team. With other companies such as Allied-Signal and Colgate-Palmolive Co. as clients, the tax schemes brought more than $20 million a year in fees to Merrill. The Internal Revenue Service later pulled the plug on the strategy, however.
Zakaria, also a member of Merrill's operating committee, is a Harvard-trained math whiz who joined Merrill's investment banking unit in 1987. He was named managing director in 1991, and from May 2000 to October 2001, he was head of corporate risk management.
Zakaria's division helped power Merrill to its second-best quarter ever last month, accounting for 55 per cent of the New York company's $5.3 billion in revenue.
As co-heads, Fleming, 40, will be responsible for all origination activities, including global investment banking, while Kim, also 40, will be responsible for the global debt and equity businesses, Merrill said.
Shares of Merrill Lynch closed down a penny at $51.25 on the New York Stock Exchange Wednesday, just below a 52-week high of $54.96 reached July 31.