Citi, Morgan Stanley to Combine Brokerages?


Morgan Stanley is likely to pay Citigroup between $2 billion to $3 billion for a 51 percent stake in the brokerage Smith Barney, a person close to the negotiations said. (Read TIME’s “Bailout Report Card”)

Morgan Stanley would then have the option to buy Smith Barney over the next three to five years, the person said. The person spoke on condition of anonymity because he was not authorized to speak about the ongoing talks.

If negotiations proceed through the weekend as they have been, an announcement could come as early as Monday, the person said.

Word of the negotiations came as investors digested news Friday that Robert Rubin, a senior adviser to Citi who has drawn heavy criticism, would resign and would not seek another term on the board.

A combination of the brokerage units would help Citigroup get more much-needed cash and cut costs, said Aite Group analyst Alois Pirker. The benefit for Morgan Stanley, Pirker said, would be a bigger staff to compete with other growing brokerages — particularly Merrill Lynch, which recently was acquired by Bank of America Corp.

The deal may also lead to a full-fledged merger between the two banks, he speculated.

“The ultimate goal could be to merge the two entities fully,” Pirker said. “Morgan Stanley needs deposits, theres no doubt about that. They wont get that by telling brokers to get deposits from their clients.”

Morgan Stanley applied to become a bank holding company last fall to get loans from the government and collect deposits — one of the few reliable sources of funding these days with the credit markets still squeezed.

The government is not driving the negotiations between Citigroup and Morgan Stanley, people with knowledge of the situation said. They also spoke on condition of anonymity because they were not authorized to speak about the matter.

There were no talks scheduled for this weekend between the Treasury Department and Citigroup officials.

via Citi, Morgan Stanley to Combine Brokerages? – TIME.

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About zyakaira

Investment Banker, 40s, Bangalore This Biopic and this web recreates how one point of view, one person can impact a tremendous economic engine that the world thrives and mis-thrives on. This one has the knowledge and the civil sense , the art of conversation and some good writing to mentor others as powerful and help global managers develop and fine tune their approach on US markets, China, India and the world. Read on here, and let me know what you need. It can be a race for TRPs, a race for new markets and a race to do what is right. I have the pulse of the crisis, the recovery and the market direction and can help you build and refine your strategy as i have helped thousands of managers and multiple global corporations. Of course, it’s more fun if you talk to me. I am in favor of leading this moving of the economic crisis and will partner with you in a soft and subtle way, just the way we both ride to the top. But you can write with us, opine and just reply with aplomb and shine on Twitter , 4 square , Facebook and any other social “choupal” of choice via zyaadakairaada Profile & Portfolio - SocialPicks Different flavours at: http://benchilibowl.wordpress.com http://zyaada.mp

Posted on January 11, 2009, in Bank Stocks, Financial Markets, GDOW, US and tagged , , , , , , , . Bookmark the permalink. Leave a comment.

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