Oct. 30 (Bloomberg) -- Stan O'Neal was ousted as chairman and chief executive officer of Merrill Lynch & Co., less than a week after reporting the biggest quarterly loss in the 93-year history of the world's largest brokerage.

Merrill said in a statement today that Alberto Cribiore will serve as non-executive chairman until the firm names a successor. Cribiore will lead a committee to find a replacement for O'Neal, 56, who served as CEO for five years.

O'Neal lost the confidence of investors after posting a $2.24 billion third-quarter loss, six times the amount that the New York-based firm forecast just three weeks earlier. Merrill has declined almost 28 percent in New York trading this year, the second-worst performance after Bear Stearns Cos. among the five largest U.S. securities firms.

``They have to move fast,'' said Mark Batty, who helps manage about $77 billion including Merrill shares as an analyst at PNC Wealth Management in Philadelphia. ``They have risk management issues that need to be tackled quickly.''

O'Neal and the board of directors ``agreed that a change in leadership would best enable Merrill Lynch to move forward,'' the company said in the statement announcing O'Neal's retirement after 21 years at the firm.

Possible replacements include Laurence Fink, who sold almost 50 percent of the BlackRock Inc. money management firm to Merrill last year, and Merrill Co-President Gregory Fleming, 44, who has spent most of his career as an investment banker at the firm.

Merrill Shares

Merrill fell 2.2 percent to $65.94 at 10:13 a.m. in New York trading. The stock climbed 11 percent in the past two days on speculation O'Neal would go and the company might be a takeover target. Deutsche Bank AG analyst Mike Mayo estimates the company may be worth $120 a share in an acquisition.

The company said today that Fleming and Ahmass Fakahany will stay in their positions as co-presidents and chief operating officers. Cribiore, founder of New York-based private-equity firm Brera Capital, has been a Merrill board member since 2003.

Merrill reported an $8.4 billion writedown for subprime mortgages, asset-backed bonds and loans gone bad last week, the biggest quarterly debacle in the history of the securities industry.

The loss followed O'Neal's $1.3 billion acquisition of mortgage lender First Franklin Financial Corp. in December. At the time, O'Neal said the purchase would add ``revenue velocity.'' Instead, the takeover contributed to losses as the U.S. housing market suffered its worst slump since the 1991 recession.

Wachovia Talks

First Franklin was embarrassing for O'Neal since he had criticized acquisitions made by his predecessor, David Komansky, whose expansion culminated in a $1.7 billion charge in the fourth quarter of 2001. That's now dwarfed by O'Neal's third-quarter loss. Merrill may have to write down another $4 billion in the fourth quarter, said Meredith Whitney, a New York-based analyst at CIBC World Markets, in a note sent to clients last week.

O'Neal angered the board by approaching Wachovia Corp. Chairman and CEO Kennedy Thompson earlier this month about a possible merger without consulting Merrill directors, the New York Times reported Oct. 26, citing people with knowledge of the matter. The board has discussed replacing O'Neal with candidates, including Fink and NYSE Euronext CEO John Thain, the Times said.

The 11-member board includes Flagler Development Corp. CEO Armando M. Codina and Judith Mayhew Jonas, former provost of Kings College at the University of Cambridge, England, who will all serve as directors until next year.

Trailing Stock

Merrill shares have risen 55 percent since O'Neal took over on Dec. 2, 2002, while the 12-member Amex Broker/Dealer Index has surged 161 percent and shares of New York-based Goldman Sachs Group Inc., the biggest securities firm by market value, have tripled.

O'Neal joins a growing list of investment bank executives who have lost their jobs because of losses in the fixed-income markets. UBS AG, the biggest Swiss bank, dismissed CEO Peter Wuffli in July and said earlier this month that finance chief Clive Standish and investment-banking head Huw Jenkins were stepping down. Others who have been ousted include Bear Stearns Co-President Warren Spector and Citigroup Inc. trading head Thomas Maheras.

O'Neal, who earned his way through college by working at a General Motors Corp. assembly plant in Georgia, may receive about $160 million to $200 million from Merrill, said James Reda, managing director of James F. Reda & Associates, a New York-based compensation consultant that has analyzed O'Neal's pay package.

Merrill has said in its annual proxy statement that the size of any payment would be at the discretion of the board. O'Neal has received stock bonuses of almost $80 million during the past three years.

O'Neal got a master's degree from Harvard Business School in 1978 and worked as a finance executive at General Motors before joining Merrill as an investment banker in 1986. He was promoted to president in July 2001.

Merrill is a passive minority investor in Bloomberg LP, the parent of Bloomberg News.

To contact the reporter on this story: Bradley Keoun in New York at bkeoun@bloomberg.net.

Last Updated: October 30, 2007 10:15 EDT