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July 29, 2013 at 08:00 PM
Morgan Stanley has the government’s thumbs-up to buy the final 35% stake in its Morgan Stanley Smith Barney joint venture from Citigroup.
“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. (As part of its second-quarter 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.)
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 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.
