Mitsubishi to buy up to 20 percent Morgan Stanley stake
Mitsubishi UFJ Financial Group Inc (MUFG), Japan’s largest bank, said on Monday it planned to acquire as much as 20 percent of U.S. investment bank Morgan Stanley as part of a broader strategic alliance.
The investment comes a day after both Morgan Stanley and Goldman Sachs Group Inc were granted approval to become bank holding companies regulated by the U.S. Federal Reserve, effectively ending the investment banking model that has dominated Wall Street for more than 20 years.
After two weeks of financial markets turmoil, the Wall Street landscape has suffered a wrenching transformation, and the two previously freewheeling companies will now be subject to much tighter regulation by the Fed, including tough capital requirements.
The Mitsubishi investment, estimated to be as large as $8.5 billion, is the latest in a series of positive developments for Morgan Stanley, the second largest broker-dealer, after its stock price was sliced in half by anxious investors, worried if it could survive the worsening financial crisis.
After the Mitsubishi deal and Morgan Stanley’s conversion into a commercial bank, its shares soared as much as 14 percent.
Financial terms of the deal are subject to Mitsubishi’s scrutiny of Morgan Stanley’s businesses and assets fast cash loans. MUFG has entered into a nonbinding letter of intent for an investment that “would eventually reach 20 percent” of its equity, Morgan said in a statement.
“This is another step for Morgan Stanley’s continuing independence. Morgan Stanley has improved its bargaining position for anything it does with respect to a merger or acquisition,” said Michael Holland, who oversees more than $4 billion of investments as head of Holland & Co.
“They have a big investor now standing behind them, with a lot more assets to invest,” Holland added.
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