Morgan Stanley announced this friday that it has received all regulatory approvals to acquire the remaining 35 percent interest in Morgan Stanley Smith Barney Holdings from Citigroup, fulfilling a key strategic priority. Upon the close of the purchase, Morgan Stanley will own 100 percent of the business, which operates under the name Morgan Stanley Wealth Management.
Morgan Stanley will notify Citigroup that it intends to exercise its right to purchase the remaining interest at a previously established price of $4.7 billion, payable in cash. The closing is expected to take place on or about June 28, 2013. Morgan Stanley will record a negative adjustment to capital (i.e., shareholders’ equity) of approximately $200 million (net of tax) to reflect the difference between the purchase price for the 35 percent redeemable non-controlling interest in MSSBH ($4.725 billion) and its carrying value. This adjustment will negatively impact the calculation of basic and fully diluted earnings per share for the three- and six-month periods ended June 30, 2013.
Additionally, MSSBH will redeem all of the Class A Preferred Interests in MSSBH owned by Citigroup and its affiliates for a purchase price equal to their liquidation preference plus accrued and unpaid distributions, or approximately $2.028 billion in aggregate, simultaneously with Morgan Stanley’s purchase of the remaining interest.
James P. Gorman, Chairman and Chief Executive Officer of Morgan Stanley, said: “This is a historic day for Morgan Stanley. It is the culmination of a multi-year effort to transform our business model into one that offers stronger shareholder returns and greater stability in volatile markets. Immediately upon closing, we expect to start seeing the benefits of 100 percent ownership – including an expanded deposit base, unique syndication and distribution capabilities and enhanced opportunities for both our wealth management and institutional clients.