Morgan Stanley, home to 8,350 advisors, is forming a "strategic alliance" with Mitsubishi UFJ Financial Group of Japan, and - along with Goldman Sachs - it has become a bank-holding company, ending its days as an investment bank.
"Based on consultation with the Department of Justice regarding the applications of Goldman Sachs and Morgan Stanley to become bank holding companies, the Federal Reserve Board announced on Monday [September 22] that the transactions may be consummated immediately without the application of the five-day antitrust waiting period," according to a Fed statement.
Morgan Stanley announced Monday that it entered into a letter of intent to pursue a strategic alliance with Mitsubishi UFJ Financial Group, Japan's largest banking group and the world's second largest bank holding company with $1.1 trillion in bank deposits. The letter of intent gives Mitsubishi UFH the right to buy up to 20 percent of Morgan Stanley's equity on a fully diluted basis. After the transaction, a representative of MUFG will join the Morgan Stanley board.
Last week, Morgan Stanley had reportedly been in merger talks with both Wachovia and China's state-owned bank Citic. In December, Morgan Stanley sold nearly 10 percent of its shares to China Investment Corporation. Morgan Stanley's shares have traded between 11.7 and 69.23 in the past 12 months; they traded on Monday near 28.
"This strategic alliance with Mitsubishi UFJ can put Morgan Stanley in an even stronger position as we look to realize the opportunities we see in the rapidly changing financial marketplace," says Morgan Stanley Chairman and CEO John J. Mack. "As one of the largest commercial banks in the world, Mitsubishi UFJ would be a valuable partner as we transition to a bank holding company and build our bank services and deposit base. This alliance also would build on Morgan Stanley's deep ties and market leadership in Japan and throughout Asia, and help us to continue growing our business in this critically important region. We would be honored to welcome a distinguished bank like Mitsubishi UFJ as a long-term investor and strategic partner of Morgan Stanley, and we would look forward to working closely with them to strengthen both of our businesses."
Mitsubishi Tokyo Financial Group and UFJ Holding of Osaka merged their operations starting in October 2005. The combined entity owns UnionBanCal, the parent firm of Union Bank of California and HighMark Funds.