8-KOther Events

MORGAN STANLEY 8-K Report, Corporate Update (Sep 11, 2012)

Filed September 11, 2012For Securities:MSMS-PKMS-POMS-PQMS-PAMS-PFMS-PIMS-PLMS-PPMS-PEMSTLW

Summary

This 8-K filing from Morgan Stanley (MS) on September 11, 2012, details significant progress in their acquisition of Morgan Stanley Smith Barney Holdings LLC (MSSBH) from Citigroup Inc. (Citigroup). Morgan Stanley announced an agreement to purchase an additional 14% interest in MSSBH, which includes the transfer of approximately $5.5 billion in deposits at no premium. This transaction is expected to close in the third quarter of 2012. The filing also outlines Morgan Stanley's future intentions and rights to acquire Citigroup's remaining stake in MSSBH. Key provisions include efforts to acquire at least an additional 15% by June 1, 2013, with a long-term goal of acquiring Citigroup's entire remaining interest by June 1, 2015. The pricing structure for these future acquisitions is also detailed, with a fixed purchase price for interests acquired by June 1, 2015, and fair market value (FMV) determination for subsequent purchases.

Key Highlights

  • 1Morgan Stanley reached an agreement to purchase an additional 14% interest in Morgan Stanley Smith Barney Holdings LLC (MSSBH) from Citigroup.
  • 2The acquisition of the 14% interest includes the transfer of approximately $5.5 billion in customer deposits at no premium.
  • 3The implied 100% valuation for MSSBH in this transaction is $13.5 billion.
  • 4Morgan Stanley aims to acquire Citigroup's entire remaining stake in MSSBH by June 1, 2015, subject to governmental approvals.
  • 5The company will also seek to acquire at least an additional 15% interest by June 1, 2013, with an extension to June 1, 2014, if approvals are delayed.
  • 6The purchase price for interests acquired by June 1, 2015, is set at $4.725 billion (pro-rated if less than 35% acquired), with zero premium on related deposit transfers.
  • 7Post-June 1, 2015, purchases of remaining interests will be at fair market value (FMV) determined by an appraisal process.

Frequently Asked Questions

The primary purpose of this 8-K filing is to announce Morgan Stanley's agreement with Citigroup regarding the acquisition of further ownership stakes in their joint venture, Morgan Stanley Smith Barney Holdings LLC (MSSBH), and to detail the terms of this agreement.

Morgan Stanley's purchase of the additional 14% interest in MSSBH is expected to be completed in the third quarter of 2012.

The transfer of approximately $5.5 billion in deposits is directly tied to the acquisition of the 14% ownership interest. Importantly, these deposits are being transferred at no premium, which is a favorable term for Morgan Stanley.

Morgan Stanley has outlined its intention and right to acquire Citigroup's remaining membership interests in MSSBH by June 1, 2015. This includes an intermediate step to acquire at least an additional 15% by June 1, 2013 (with a potential extension to June 1, 2014), subject to obtaining necessary governmental approvals.