Sept. 16 (Bloomberg) -- Merrill Lynch & Co. Chief Executive Officer John Thain and two former Goldman Sachs Group Inc. colleagues he recruited may reap almost $200 million for their year running Merrill if they leave or are given lesser roles after Bank of America Corp. buys the brokerage.

Thain, who got a $15 million bonus when hired in December, stands to get an additional $11 million in accelerated stock payouts if he doesn't stay after the deal, compensation consultant Graef Crystal said. Trading chief Thomas Montag, who joined in August, may get $76 million including bonus and accelerated awards. Strategy head Peter Kraus was given $95 million including bonus and stock awards to replace a Goldman package he had to forfeit, people familiar with the matter said.

While Thain managed to negotiate a merger even as rival Lehman Brothers Holdings Inc. sank into bankruptcy, shareholders may resent the executive payouts. Merrill's stock returned more than 13 percent a year from 2000 through 2006. Since Dec. 1 of last year, Thain's first day, the shares have fallen more than 60 percent, as writedowns on devalued mortgage holdings eroded the company's financial results.

``Investors will definitely be disappointed,'' said Richard Bove, an analyst at Ladenburg Thalmann & Co. ``Thain's claim to fame here is that he kept them from going bankrupt.''

Merrill spokesman William Halldin declined to comment.

Under terms of the deal announced yesterday by Charlotte, North Carolina-based Bank of America, each Merrill share will be exchanged for 0.8595 shares of Bank of America stock. Based on Bank of America's stock price of $33.74 on Sept. 12, that works out to about $29 a share.

Bonus Payments

Because the payment is in stock, Merrill shareholders would get less if Bank of America's share price falls before the deal's closing date, scheduled for the first quarter of next year. Based on Bank of America's share price today, the offer is worth $23.58 per Merrill share.

Merrill shares plunged 36 percent last week as investors speculated that the New York-based firm might suffer the fate of Lehman. Since the deal was announced early yesterday, they have climbed 17 percent.

At a press conference yesterday, Thain, 53, acknowledged that he wanted a better result.

``This isn't necessarily the outcome I would have expected when I took this job,'' Thain said. He said his future role at the combined company hasn't been decided.

`Mr. Fixit'

At a meeting with employees at the firm's headquarters in New York's World Financial Center, Thain appeared to fight back tears when expressing regret that Merrill's 94-year run as an independent firm ended on his watch, according to two people who attended.

Thain earned the moniker ``Mr. Fixit'' for his stewardship of the New York Stock Exchange for four years beginning in January 2004. Before that, he was president and chief operating officer at New York-based Goldman, where he served under then- CEO Henry Paulson. Now U.S. Treasury secretary, Paulson helped to lead a weekend of discussions during which Bank of America initially weighed a bid for Lehman.

Thain said Merrill's talks with Bank of America began on the morning of Sept. 13. The deal was done by nightfall the next day.

Writedowns on mortgage-linked investments have stuck Merrill with almost $19 billion of net losses over the past year, and Oppenheimer & Co. analyst Meredith Whitney predicted last week that Merrill would post a $6.87 billion deficit in the current quarter. Most of the bad investments were accumulated under Thain's predecessor, Stan O'Neal, who was ousted last October.

Magnitude, Risk

``I doubt Thain understood the magnitude of risk and exposure on Merrill's balance sheet,'' Bove said. ``I don't think anyone could have done a whole lot.''

If Thain leaves the newly merged company, he will get 379,637 shares, worth $11 million at $29 per share, according to Crystal.

The payouts wouldn't be much of a raise compared with the $20.2 million Thain got during his last year at Goldman Sachs in 2003.

``Thain wasn't at Merrill for very long,'' said David Schmidt, a senior consultant for New York-based compensation firm James F. Reda & Associates. ``My sense is he isn't coming out ahead relative to where he was.''

In January, Thain began recruiting Montag, who agreed in April to join as head of trading and sales with a start date of Aug. 4. In addition to a $39 million guaranteed 2008 bonus to be paid in January, Montag got 1.05 million shares subject to vesting over three years, according to regulatory filings, awarded to replace stock grants from his prior employer that he forfeited by joining Merrill. Those, worth $30 million at $29 a share, may vest in a change of control.

Direct Report

Montag, 51, also has 10-year options on 2.4 million shares of Merrill Lynch stock carrying a strike price of $26.40, Crystal said. Those options, which would fully vest if he left the combined company, would be worth a minimum of $6.4 million at the $29 per share price, according to Crystal, and could be worth far more.

Montag's contract states that his stock automatically vests after a change of control if there's a ``qualifying employment termination,'' including a reduction in his responsibilities or a decrease in pay that is not in line with what's ``experienced generally by other employees of Merrill.'' Another triggering condition is being required to report to ``someone other than the CEO.'' Montag reports directly to Thain.

Kraus's Contract

Kraus, 56, joined Merrill last week and spent the past weekend helping to negotiate the Bank of America deal. Merrill's contract with Kraus, who worked at Goldman for 22 years before leaving in March, includes restricted stock and options to compensate him for the forfeited Goldman package, said two people familiar with the matter, who declined to be identified because Merrill hasn't disclosed it. That package was valued at $65 million in May, when his hiring was announced, the people said.

He also got a guaranteed 2008 bonus of $30 million, one person familiar with the award said.

``That Thain was able to pull off any sort of deal in this market may be sufficient for investors,'' said John Challenger, chief executive officer of Chicago-based outplacement firm Challenger, Gray & Christmas Inc. ``Just ask a Lehman shareholder.''

To contact the reporters on this story: Jonathan Keehner in New York jkeehner@bloomberg.net; Bradley Keoun in New York at bkeoun@bloomberg.net.

Last Updated: September 16, 2008 14:29 EDT