Morgan Stanley struck a deal with Citigroup Inc. on September 11 to take full control of Morgan Stanley Smith Barney by June 1, 2015. The agreement places a value of $13.5 billion on the joint venture that the two banks formed in January 2009, when Morgan Stanley paid $2.7 billion for a 51 percent stake in the entity. The two companies sparred over the division's value, with Morgan Stanley claiming the unit was worth a little more than $9 billion, while Citi assessed its value at $22 billion. But Perella Weinberg Partners came up with an appraisal of less than $13.5 billion that helped bring the two sides to a resolution.
Unwinding the joint venture will help Citigroup strengthen its capital base and further Morgan Stanley CEO James Gorman's desire to expand his company's presence in retail brokerage, a business he ran both at Morgan Stanley and at Merrill Lynch & Co. Inc., his previous employer.
Morgan Stanley paid $1.89 billion for an additional 14 percent of Morgan Stanley Smith Barney on September 18, and by the end of the month the buyer had rebranded it as Morgan Stanley Wealth Management. The name change marked the demise of the Smith Barney name, which dated to a 1938 merger between two brokerage houses. Sanford Weill, then the CEO of Primerica Corporation, acquired Smith Barney in the 1980s and held on to the company as he made a series of acquisitions that ended with the 1998 merger that created Citigroup.
For acquiror Morgan Stanley (New York)
Chief legal officer Eric Grossman and managing director Steven Brown.
Corporate: Karessa Cain, Richard Kim, Steven Rosenblum, and associate Scott Golenbock. Tax: T. Eiko Stange and associate Vincent Kalafat. (All are in New York.) Wachtell advised Morgan Stanley on the formation of Morgan Stanley Smith Barney in 2009.
For seller Citigroup Inc. (New York)
General counsel and head of M&A legal Joseph Tedeschi and associate general counsel Jeffrey Wool.
M&A: John Bick and counsel Ajay Lele. Tax: Neil Barr and Avishai Shachar. (All are in New York.) Davis Polk has done a significant amount of work for Citi in recent years and represented the bank on the formation of Morgan Stanley Smith Barney. Citi's lead banker on the sale of the unit, Edward Kelly III, is a former Davis Polk partner.