Morgan Stanley and Smith Barney sealed a $2.75 billion joint venture today, creating the biggest team of financial advisors in the US. Bloomberg reports:
Morgan Stanley is paying $214.2 million for Citigroup’s managed futures business, subject to government and other approvals, according to a regulatory filing today. Citigroup, which received $45 billion of government aid, estimates it will recognize a gain of about $6.6 billion from the deal, higher than its original estimate of $5.8 billion.
Vikram Pandit, Citigroup’s chief executive officer, is paring businesses unrelated to branch banking, trading and investment banking to streamline the company and restore profits following last year’s record $27.7 billion net loss. He created Citi Holdings in January to manage units the bank plans to sell or wind down, including the CitiFinancial consumer-finance business and Primerica insurance.
Citigroup, the third-biggest U.S. bank by assets, and Morgan Stanley, the sixth-largest, agreed in January to create the venture to compete against Bank of America Corp., after its purchase of Merrill Lynch & Co., and Wells Fargo & Co., which took over Wachovia Corp.
Morgan Stanley will control 51% of the new company, Morgan Stanley Smith Barney, with opportunities to increase that stake in three years. According to CompliancEx, the new company will be the world’s largest brokerage, with more than 20,000 employees.
The Wall Street Journal put together a customer Q&A for the merger, worth reading if you’re wondering about your stock or accounts.