Morgan Stanley To Acquire Eaton Vance In $7B Cash And Stock Deal

Investment bank Morgan Stanley MS on Thursday disclosed entering into a definitive agreement to acquire Boston-based investment management company Eaton Vance Corp EV. The purchase consideration is estimated at $7 billion, payable partly in cash, and the balance through stocks.

Eaton Vance’s asset under management (AUM) exceeds $500 billion and the collective portfolio could boost Morgan Stanley Investment Management’s AUM to $1.2 trillion. Combined revenue figures estimate stand upwards of $5 billion.

What Happened: Eaton Vance stakeholders will receive a cash consideration of $28.25 per share, in addition to 0.5833 Morgan Stanley common stock for each share held. The total cash and stock consideration estimate is close to $56.50. Eaton Vance also declared a one-time cash dividend of $4.25 per share from existing resources, payable before deal closure.

Terming the acquisition as a perfect fit, Morgan Stanley Chairman and CEO James Gorman commented, “This transaction further advances our strategic transformation by continuing to add more fee-based revenues to complement our world-class investment banking and institutional securities franchise.”

Why Does This Matter: Through the acquisition, Morgan Stanley can leverage Eaton Vance’s retail distribution in the U.S., all the while capitalizing on its own international outreach.

Gorman clarified that once the deal follows through, the bank will not seek further acquisition opportunities.

Last week, asset management firm Trian Fund Management L.P. invested a combined amount of $900 million in Invesco Ltd IVZ and Janus Henderson Group PLC JHG, raising its position in both companies to a 9.9% stake. Trian's intention seems to be to create a company with a wider AUM base and compete with giants in the global asset management space, the Wall Street Journal reported earlier.

Price Action: Eaton Vance stock rose 48.14% to $60.65 per share on Thursday’s trading session. Morgan Stanley shares gained 0.6% during trading hours and an additional 0.8% in the after-hours to end the day at $49.39.

Photo courtesy: Icc1977 via Wikimedia

Posted In: big banksJames GormanPortfolio Asset ManagementM&ANews