Bloomberg's billions

14 March 2007 By Lauren Silva

If Merrill follows suit, it may have to adjust its 20% stake in Bloomberg, giving a glimpse at the media empire s worth. Some banks are revaluing their principal investments to comply with new federal accounting rules. Goldman booked a $500m gain this quarter.

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The Federal Accounting Standards Board recently changed its rule which affects the way private equity and investment banks value their illiquid investments. The rule says that firms need to revalue the fair market value of their assets to reflect the price that would be received to sell the asset or paid to transfer the liability (an exit price), not the price that would be paid to acquire the asset or received to assume the liability (an entry price)…a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability.

In Goldman's firstquarter earnings, the company said that its net revenues on principle investments included approximately $500m in gains in the first quarter related to the firm's adoption on SFAS No. 157. Analysts say that the other brokers will also be revaluing their principle investments as well.

Merrill Lynch bought a 30% stake in Bloomberg in 1985. In 1996, the broker sold back a third of its stake to Bloomberg for $200m, booking a onetime gain of $155m, according to a Dow Jones report. At the time, Bloomberg was valued at about $2bn. New York Mayor Michael Bloomberg owns 72% of the firm, while Merrill Lynch owns about 20%. A small handful of staff owns the rest. According to Forbes' most recent billionaires list, Michael Bloomberg is worth $5.3bn.

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