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June 21, 2013 at 09:31 AM
Morgan Stanley (MS) has the government’s thumbs-up to buy the final 35% stake in its Morgan Stanley Smith Barney joint venture from Citigroup, the company said early Friday.
“This is a historic day for Morgan Stanley,” said Chairman and CEO James P. Gorman, in a press release. “Immediately upon closing, we expect to start seeing the benefits of 100% ownership—including an expanded deposit base, unique syndication and distribution capabilities and enhanced opportunities for both our wealth management and institutional clients.”
Morgan Stanley says it will pay $4.7 billion in cash for this last slice of the joint venture and expects the deal to close by June 28.
The joint venture between Morgan Stanley and Smith Barney came together in 2009, when Morgan Stanley acquired a 51% share (for $2.7 billion) and Citigroup (C) 49%. At the time, the combined entity—Morgan Stanley Smith Barney—had some 18,500 advisors.
In September, the two parties clashed over the valuation of the deal, which was put at $13.5 billion, much lower that Citi’s estimated value of $22 billion. It included about 16,930 employee advisors as of June 30, 2012.
After an agreement was reached, Morgan Stanley bought an additional 14% stake in the venture and changed its name to Morgan Stanley Wealth Management, which had about 16,300 advisors as of March 31.
(As part of its second-quarter ’13 earnings, Morgan Stanley will record a negative capital adjustment of about $200 million, net of tax, which reflects the difference between the purchase price and its carrying value.)
“Today, the power of Morgan Stanley’s platform—a premier investment bank and one of the world’s pre-eminent wealth and asset management franchises—is clearer than ever before,” explained Gorman (right), in a statement. “With this milestone behind us, we have added momentum to carry out our full plan to achieve higher shareholder returns.” 