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ML must be screaming now....

http://nypost.com/business/23524.htm

THEY CAN'T LOSE

By RICHARD WILNER

April 28, 2005 -- A half-dozen Wall Street banks crunched numbers yesterday to see if a rival bid for the New York Stock Exchange made sense.
One number they surely came across might have made them gag on their lattes: $146.1 million.

That's how much Goldman Sachs has profited by its job advising both sides of the NYSE-Archipelago Holdings merger.

The Goldman Sachs profit reflects an increase in its 15.5 percent stake in Archipelago, the value of the stock in the new company they will receive for the 21 NYSE seats they own and the fees they will get from both sides.

The details of the mammoth payday were included in Archipelago's filings with the Securities and Exchange Commission.

"Goldman makes out very well on all sides of the deal," said James Ellman, who manages $50 million at Seacliff Capital, which holds shares of Goldman. "This is a home run financially, if the deal closes as proposed."

The largest piece of the profit, roughly $84.7 million, comes from the sharp increase in Archipelago stock.



The shares closed yesterday at $28.49, up 99 cents. That's up from the $16.90 close before the deal was announced. That's a $546 million rise in market cap — or $84.7 million for the company's largest shareholder.

Goldman Sachs will also realize stock worth roughly $54.4 million when they surrender their 21 NYSE seats. That is comprised of an NYSE value of $3.1 billion, or a per seat value of $2.29 million — plus the $300,000 per seat cash payout.

Archipelago paid Goldman a fee of $3.5 million, according to the SEC filing.

The NYSE has not said what it paid Goldman for a fee, and the total profit for Goldman assumes an identical fee.

Archipelago's filing also reveals that Goldman leases another 92 NYSE seats. The leases allow Goldman to vote those seats but do not carry with them any profit from the surrender of the seats.

In addition, Goldman's net profit on the deal will be slightly higher because its purchase price of the Archipelago shares was, in all likelihood, substantially below the pre-deal price.

If the deal goes through as structured, Goldman will be the largest shareholders, at 5.7 percent, of the new NYSE Group, Inc.

It was the sizeable Goldman profit, created, in part, from it working both sides of the deal, that sparked the outrage of Ken Langone, the billionaire investor and former NYSE director.

Langone has corralled several pals on Wall Street — including John J. Mack, the former Morgan Stanley CEO — to weigh a competing bid.

Langone, 69, the co-founder of The Home Depot, feels the NYSE could be getting the short end of the deal by giving Archipelago 30 percent of the merged company.

But the anger inside the group seems to fade markedly on April 26 when the group said it would wait to hear NYSE boss John Thain explain the deal face-to-face before re-lighting the retro-rockets on a rival bid.

With Post Wire Services