Morgan Stanley and Citigroup have agreed on the valuation to be used in pricing Morgan Stanley’s purchase of the remaining stake in the Morgan Stanley Smith Barney joint venture: $13.5 billion for the full business, which includes close to 17,000 advisors.
Morgan Stanley had been trying to price a 14% stake—to add to its 51% interest in the joint venture—over the past few months. As part of the latest deal, which was announced on Sept. 11, it can buy the remaining 35% stake at this valuation through June 1, 2015, pending regulatory approval.
“This mutually beneficial agreement gives both parties certainty and transparency on price and timing, and is a significant milestone for Morgan Stanley in the implementation of our strategy,” said Morgan Stanley Chairman and CEO James Gorman, in a press release.
In recent months, Morgan Stanley and Citigroup had disputed the value of the Morgan Stanley Smith Barney joint venture. Citigroup said the full value of MSSB was $22 billion, while Morgan Stanley says it was worth only $9 billion (though its SEC filings put the value closer to $12 billion). Both banks worked with Perella Weinberg Partners on an appraisal.
“This is a win for Morgan Stanley and a loss for Citi,” said Chip Roame, head of the consulting group Tiburon Strategic Advisors in an interview. “The price is more aligned with what Morgan Stanley has said, and Citi will take a loss.”
Still, Citi management spoke positively about the deal. “I am pleased we have reached agreement on a value for our remaining stake in Morgan Stanley Smith Barney,” Citigroup CEO Vikram Pandit said in a statement.