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Wednesday, September 19, 2012

Gorman Strengthens His Hold on MSSB

News summary by MFWire's editors

Advisor-sold mutual fund shops, ownership for one of your key distribution partners is consolidating. Suzanne Kapner and Aaron Lucchetti in the Wall Street Journal report that, as expected, Morgan Stanley CEO James Gorman just had the investment bank shell out $1.89 billion to snap up another 14 percent of Morgan Stanley Smith Barney from Citigroup.

Citi and Morgan Stanley revealed the deal last week.

The deal boosts Morgan Stanley's MSSB stake to 65 percent and gives Gorman the option of buying the remaining 35 percent by June 1, 2015. Both the current deal and the 35 percent remaining value MSSB at the same combined price: $13.5 billion. That valuation is a blow to Citi: as recently as February, the same two WSJ reporters revealed that the bank valued MSSB at $20 billion.

MSSB ended 2011 with $1.65 trillion in client assets. As of March 31, the wirehouse had 17,193 advisors.

Former Merrill Lynch president Gregory Fleming leads Morgan Stanley's wealth division, which MSSB. The wealth division had revenues of $13.4 billion and pretax margins of 10 percent (i.e. $1.34 billion) in 2011. According to the WSJ, Gorman hopes to boost MSSB's margins to 20 percent. 

Edited by: Neil Anderson, Managing Editor


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