Morgan Stanley has announced plans to buy asset manager Eaton Vance in a $7bn cash and stock deal, as it seeks to build its investment management business.
Under the terms of the agreement, Eaton Vance shareholders will receive $60.75 per share, made up of $28.25 per share in cash and approximately the same value of Morgan Stanley’s shares, as well as a one-time cash dividend of $4.25.
The deal will help bolster Morgan Stanley’s investment management unit, its smallest business, as well as insulating it from any weak periods for its trading and investment banking operations.
The Wall Street bank said the acquisition would boost assets under management (AUM) to $1.2 trillion and over $5bn of combined revenues.
“Eaton Vance is a perfect fit for Morgan Stanley,” said chief executive James Gorman. “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.”
Gorman has spent over a decade moving the bank away from its reliance on its investment banks towards more stable revenues driven by wealth and asset management.
After closing a $13bn acquisition of online brokerage Etrade this week, the acquisition of Eaton Vance is his latest attempt to grow Morgan Stanley’s asset management unit.
But Gorman today ruled out any further acquisitions, according to Reuters. “We’re not doing more acquisitions, we’ve made our bed, we’re going to lie in it”, he said.
The bank enjoyed record revenues in the second quarter after a surge in trading. It was the only big Wall Street bank to post a rise in earnings as trading revenues soared nearly 70 per cent.
Shares in Eaton Vance soared 46.3 per cent in early trading, while Morgan Stanley inched 0.9 per cent lower.