Actionable insights straight to your inbox


Morgan Stanley To Acquire Asset Management Firm Eaton Vance for $7 Billion

“Eaton Vance is a perfect fit,” Morgan Stanley CEO James Gorman said. At an analyst call to discuss the deal, Gorman said the firm had been looking at the acquisition for “several years.”

Image source: Eaton Vance

By Niket Nishant and Matt Scuffham

(Reuters) – Morgan Stanley said on Thursday it would buy asset management firm Eaton Vance Corp for about $7 billion in a cash-and-stock deal that advances Chief Executive James Gorman’s push to grow the bank’s investment management business.

The deal will help shore up the performance of the unit, its smallest business, while also insulating the bank from weak periods for its main trading and investment banking operations.

Morgan Stanley said the acquisition would boost Morgan Stanley Investment Management’s assets under management to about $1.2 trillion and revenue to $5 billion.

“Eaton Vance is a perfect fit,” Gorman said in the statement. At an analyst call to discuss the deal, the CEO said Morgan Stanley had been looking at the deal for “several years.”

Gorman also ruled out the likelihood of further acquisitions. “We’re not doing more acquisitions, we’ve made our bed, we’re going to lie in it.”

Eaton’s shareholders will receive $28.25 per share in cash and 0.5833 Morgan Stanley shares for each share held. The deal represents a premium of 38% to Eaton’s last closing price on Wednesday.

Eaton’s shares are 47% higher to $60.30, while Morgan Stanley is up 05% to $48.96 at 10:15am ET.

Since taking the helm a decade ago, Gorman has pulled off a number of big acquisitions including E*Trade earlier this year for $13 billion, and the latest buyout is his attempt to grow the asset management unit quickly.

The business has struggled ever since the financial crisis of 2008-09, when some U.S. banks were forced to sell their stakes in funds to comply with the Volcker Rule.

The Volcker Rule was created by the 2010 Dodd-Frank Act to bar banks that accept taxpayer-insured deposits from engaging in short-term speculative trading and risky investments.

Morgan Stanley said it would realize $150 million of annual savings through the deal.

Eaton will also pay its shareholders a one-time special cash dividend of $4.25 per share before the close of the deal. The deal is expected to be break-even to earnings per share immediately and marginally accretive thereafter, Morgan Stanley said.

Reporting by Niket Nishant and C Nivedita in Bengaluru; Editing by Aditya Soni, Saumyadeb Chakrabarty and Patrick Graham.


Source: Reuters

The implications of the dollar potentially losing its status as the global reserve are numerous. Obviously, there may be currency risks, and decreased demand for U.S. Treasuries could lead to rising interest rates. I would also expect to see massive commodity price swings.
Many of us economy-watchers have been expecting recession, though with significant differences on odds and timing. Regardless, recent banking developments just made recession more likely and may have accelerated its onset.
Many people think of position size in terms of how many shares they own of a particular stock. But it’s much smarter to think of it in terms of what percentage of your total capital is in a particular stock.