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” Pandit said.
?Morgan Stanley and Citigroup Inc. (C) executives held unsuccessful talks since August in a final push to settle a dispute over the value of their jointly owned brokerage, people with direct knowledge of the matter said.
An independent appraiser's report,Miu Miu Purses, delivered late on Sept. 10, and a phone call from Morgan Stanley Chief Executive Officer James Gorman to Citigroup CEO Vikram Pandit helped settle the matter within hours.
The overnight effort yielded an agreement for Morgan Stanley to buy the rest of Morgan Stanley Smith Barney in pieces through 2015 at a fixed valuation of $13.5 billion. The accord avoided repeated fights in future years over what the unit is worth and helped Citigroup lock in a price higher than the appraisal. The decision also forced Citigroup to take a $4.7 billion writedown on its investment in the business.
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“It's pretty clear who the winner and loser was,” said David Trone,Miu Miu Totes, a JMP Securities LLC analyst who has a market underperform rating on both firms. “Morgan Stanley positioned itself very well in this transaction from the start.”
Perella Weinberg Partners LP, the New York-based investment bank hired to provide the appraisal, set off the flurry of talks by delivering a valuation below $13.5 billion,Miu Miu Totes, people with direct knowledge of the matter said,Miu Miu Handbags. The figure was so low -- closer to Morgan Stanley's $9 billion estimate than Citigroup's $22 billion -- that it triggered a contractual clause further depressing the price on a 14 percent piece of the business,Miu Miu Handbags.
Gorman, 54, and Pandit, 55, said in statements that the deal provides “certainty” for investors,Miu Miu Handbags, assuring them of the price and timing for the sale of Citigroup's remaining stake. “The more we put the past behind us, the more we can focus on our future,” Pandit said,Miu Miu Totes.
Talks Expanded
The venture was formed in early 2009 when Citigroup sold Morgan Stanley a majority stake in its Smith Barney brokerage. At the time,Miu Miu Purses, Citigroup sought to raise capital after its $45 billion U.S. bailout. Morgan Stanley got a 51 percent stake in the venture and the right to buy the rest over time. The deal generated a $9.5 billion pretax gain for Citigroup.
“At the time it was struck, Morgan Stanley held all the cards and got itself in a very savvy position,” Trone said.
Morgan Stanley said in May it would exercise an option to buy the 14 percent piece, increasing its stake to 65 percent. The banks' agreement required them to hire an independent appraiser, and they chose Perella Weinberg in July. |
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