Deliver Your News to the World

Morgan Stanley and Citi Launch Joint Venture to Create New Global Leader in Wealth Management


Morgan Stanley Smith Barney Is New Industry-Leading Franchise With Over 18,500 Financial Advisors

Combination of World’s Top Wealth Management Brands Offers Clients Unrivaled Global Platform, Intellectual Capital and Research Resources.

New York – Morgan Stanley (NYSE: MS) and Citi (NYSE: C) today announced the closing of their Morgan Stanley Smith Barney joint venture, which will create a new global leader in wealth management. Originally targeted for the third quarter of 2009, the closing was achieved ahead of schedule.

As previously announced, Morgan Stanley Smith Barney combines Morgan Stanley’s Global Wealth Management Group with Citi’s Smith Barney in the U.S., Quilter in the UK, and Smith Barney Australia retail units into a new wealth management firm with over 130 years of experience.

Leveraging the combined strengths of two leading global brands in wealth management, the new Morgan Stanley Smith Barney features:

* Over 18,500 world-class financial advisors, including 33 of the top 100 financial advisors on the Barron’s 2009 “Top Advisors” survey
* 6.8 million client households globally, with a strong presence in the high-net-worth client segment
* Approximately $14 billion in pro forma net revenues
* 1,000 brokerage locations around the world, including in the U.S., Latin America, Europe/Middle East and Asia

“Morgan Stanley Smith Barney perfectly complements Morgan Stanley’s traditional leadership position in the global institutional markets,” said John Mack, Chairman and CEO of Morgan Stanley. “It is a clear industry leader that will be the premier choice for clients and high-quality financial advisors around the world, who will benefit from an unrivaled global platform, a vast array of products and services and the powerful intellectual capital that both firms bring to this venture.”

“Today’s closing marks another step in the execution of the Citi Holdings strategy. One important goal for Citi Holdings is to optimize the value to Citi shareholders through value-enhancing disposition and combination opportunities. We believe this transaction is consistent with that goal,” said Vikram Pandit, Chief Executive Officer of Citi. “Citi benefits from this transaction by monetizing its investment in its wealth management business, while continuing to benefit from a multi-year earnings stream created by the larger firm.”

Both Morgan Stanley and Citi will access the joint venture for retail distribution and each firm’s institutional businesses will continue to execute order flow from the joint venture. At closing, Citi estimates it will recognize a pre-tax gain of approximately $10.9 billion, or approximately $6.6 billion on an after-tax basis, create close to an estimated $7.8 billion of tangible common equity and increase Citi’s Tier 1 capital ratio by approximately 86 basis points on a pro forma basis as of March 31, 2009.

Under the final terms of the agreement, Citi will transfer 100 percent of its Smith Barney, Smith Barney Australia and Quilter retail units for a 49 percent stake in the joint venture and an upfront cash payment of $2.75 billion. Morgan Stanley will transfer 100 percent of its Global Wealth Management business for a 51 percent stake in the joint venture. After year three, Morgan Stanley has the right to increase its stake in the joint venture, although Citi will continue to own a significant stake through at least year five.

The joint venture is expected to create significant value for Morgan Stanley and Citi by achieving cost savings of approximately $1.1 billion after full integration, which will take about two years. These operational efficiencies represent approximately 15 percent of the combined firm’s estimated expense base, excluding financial advisors’ commission compensation.

Offers Clients and High-Quality Financial Advisors New and Innovative Opportunities for Growth

James Gorman, Morgan Stanley Co-President and Chairman of Morgan Stanley Smith Barney, said, “Morgan Stanley Smith Barney’s 18,500 financial advisors are some of the most talented and productive in the industry and include eight of the top 10 advisors ranked by Barron’s magazine. Given the combined resources and global platform at our disposal, we believe Morgan Stanley Smith Barney will become the employer of choice for other leading financial advisors around the world. As we continue to grow, we look forward to offering our clients even greater value through new and exclusive products and services.”

Charles Johnston, President of Morgan Stanley Smith Barney, said, “Now, more than ever, investors need advisors they can trust, and the entire team at Morgan Stanley Smith Barney is ready to help our clients navigate these challenging markets. We are reinventing the wealth management firm to deliver the best advice, superior service and the most innovative financial solutions to every client. Looking ahead from my 20 years at Smith Barney, I’m confident that Morgan Stanley Smith Barney will set the new industry standard for success.”

Other Information

To encourage certain Citigroup employees to join the new joint venture, Citi will fund and Morgan Stanley will make equity grants to such employees to replace the value of certain equity awards they will forfeit in connection with the closing of the joint venture. Awards, which will be made under the “Morgan Stanley 2009 Replacement Equity Incentive Compensation Plan for Morgan Stanley Smith Barney Employees” (the “Equity Plan”), may be made in the form of stock appreciation rights, stock options, restricted stock and restricted stock units and other forms of stock-based awards. Up to five million shares of Morgan Stanley’s common stock may be granted under the Equity Plan (subject to adjustment for certain transactions and changes in corporate structure) to a maximum of 15,000 transferred Citigroup employees. A significant majority of the awards granted under the Equity Plan will be made shortly after today’s closing announcement, although additional awards will be made as certain employees transfer from Citigroup over the next 36 months. Each recipient of an award will become vested in the award in accordance with its terms. The Equity Plan (and the equity awards granted thereunder) was adopted without stockholder approval pursuant to the employment inducement award exception under the New York Stock Exchange Corporate Governance Listing Standards.


This news content was configured by WebWire editorial staff. Linking is permitted.

News Release Distribution and Press Release Distribution Services Provided by WebWire.