Since 1935, Morgan Stanley, which was spun off from the world-famous Morgan consortium, has been attracting people's attention. Its customers include six of the top ten oil giants in the world and seven of the top ten companies in the United States, and 600 offices are distributed all over the world. There is an advertisement in Morgan Stanley, and a bolt of lightning penetrates the dark clouds. The advertisement reads: "If God wants financing, he will also ask Morgan Stanley."
Some people have commented that from Wall Street to the City of London, from Frankfurt to Zurich, Morgan Stanley's position in the global financial community seems to have never been shaken. This company, known as "blood, wisdom and money", is not only the glory of American financial industry, but also represents and draws on the dreams of American and even global financiers.
However, the autumn of 2008 rewrote the history of Morgan Stanley. Under the sweeping of the subprime mortgage crisis, the famous American investment banks that experienced the Great Depression 1.58 years, Lehman in 1994 and Bear Stearns in 1984 finally collapsed in the bleak autumn wind, while Morgan Stanley, as an investment bank on Wall Street, was less involved in bond mortgage, and its share price plummeted.
In order to prevent Morgan Stanley and Goldman Sachs Group from falling into the quagmire of subprime mortgage crisis, on September 2, 2008, the Federal Reserve announced that it approved Morgan Stanley and Goldman Sachs Group to transform from investment banks into traditional bank holding companies. Their transformation accelerated the disintegration of the independent investment banking model, after which the investment banking business will be scattered among comprehensive banks and small investment banks.
The acquisition of Smith Barney is an important measure for Morgan Stanley to go upstream in the severe situation of the financial crisis.
Some analysts believe that the transaction between Citigroup and Morgan Stanley can be described as "one willing to fight and one willing to suffer". As far as Citigroup is concerned, the government's assistance has brought greater operational pressure, and the company urgently needs to slim down, cash out its most valuable assets, and at the same time significantly cut costs. Selling Smith Barney is undoubtedly one of the first choices; Morgan Stanley, which has just transformed into a bank holding company, is also under great pressure. The acquisition of Smith Barney is expected to greatly enhance the competitiveness of the company's brokerage business, enough to counter the Bank of America that has acquired Merrill Lynch.
The acquisition of Smith Barney is the first major transaction involving a retail stock brokerage company since 1997. The success of the merger means that Morgan Stanley's retail brokerage business has surpassed Merrill Lynch in one fell swoop, which is the best way to remain competitive.
Smith Barney is one of the two major components of Citigroup's global wealth management business, and it is also a rare high-quality asset of the Group. Citigroup's financial report in the third quarter of 2008 shows that even in the first nine months of the worst financial crisis, Smith Barney's profit maintained a year-on-year growth rate of 2%, which created a revenue of 7.938 billion US dollars for Citigroup, accounting for more than 80% of Citigroup's global wealth management business. Even without Citigroup, Smith Barney itself plays an important role in the history of Wall Street. Morgan Stanley's bulk brokerage business is the largest in the world, and it is also one of the most profitable and successful businesses. Therefore, Smith Barney has always been Morgan Stanley's sworn enemy.
In terms of qualifications, Smith Barney has a history of 135 years, while Morgan Stanley is only 70 years old, almost half the age of Smith Barney. Insiders commented that the integration of two Wall Street competitors requires superb management wisdom, and it is not easy for the old rivals to cooperate, which may bring many problems, especially according to the terms of the negotiation, Smith Barney's agent will report to the boss from Morgan Stanley.
Determining the development direction of joint ventures is a thorny issue. Morgan Stanley may increase its stake in three years and hold all the shares in five to six years. Some Morgan Stanley executives tend to expand their range of brands, and some restless brokers may choose to jump ship, and the merger process is usually not smooth. A person familiar with the matter said that in order to retain brokers, Morgan Stanley and Smith Barney plan to provide them with retention bonuses.
RogerFreeman, an analyst at Barclays Capital in new york, wrote in a previous report: "The establishment of Morgan Stanley Smith Barney Company has benefited Morgan Stanley a lot, and this transaction has left it with a bigger footprint in the global wealth management business." "For Morgan Stanley shareholders, the biggest benefit is to get a very attractive asset from former competitors."
John Mack, Chairman and CEO of Morgan Stanley, said that this business will become more and more important and profitable for Morgan Stanley in the next few years.
Vikram Pandit, CEO of Citigroup, said that the joint venture will bring significant synergy and scale effect to Citigroup, greatly reduce expenses, and enable Citigroup to maintain a large stake in a company that is about to become an industry leader and has real growth opportunities. According to Citi's estimation, after the transaction is completed, Citi will realize a profit of $5.8 billion and create tangible common equity of about $6.5 billion.
James Goldman, the new chairman of Morgan Stanley Smith Barney, said: "The merger will keep the cost reduction trend of the two companies for more than 18 months." Goldman Sachs said that although the M&A fund reduced Morgan Stanley's Tier 1 capital ratio by 65,438+0 percentage points, the new company will bring book income to Morgan Stanley. "The cultures of the two institutions are similar, and the formation of the new company will be very smooth."
The complete integration of Morgan Stanley Smith Barney will take about two years, when Morgan Stanley Smith Barney is expected to save about 1 1 billion dollars. These operational efficiencies account for about 65,438+05% of the combined enterprise's estimated expenses, but do not include the financial consultant's commission. In addition, in order to encourage Citi employees to join the new joint venture company, Citigroup will provide financial support, and Morgan Stanley will repay these employees the equity awards that they have to give up because of the formation of the joint venture company in the form of equity. According to Morgan Stanley's equity incentive bonus repayment plan for Morgan Stanley Smith Barney employees in 2009, bonuses will be distributed in the form of stock appreciation rights, stock options, limited shares and limited shares. It is estimated that up to 65,438+05,000 employees of Citigroup will receive 5 million shares of Morgan Stanley common stock.