Morgan Stanley to Acquire Eaton Vance in $7 Billion Deal

The investment bank Morgan Stanley (NYSE:MS) said it would acquire the Boston-based investment management firm Eaton Vance (NYSE:EV) in a part-cash, part-stock transaction valued at approximately $7 billion.

Morgan Stanley will pay Eaton shareholders $28.25 per share in cash and 0.5833x Morgan Stanley common stock, representing total consideration of approximately $56.50 per share, or 38% more than Eaton Vance’s closing price on October 7. In addition, Eaton Vance will pay its shareholders a special, one-time cash dividend of $4.25 per share.

The deal will give Morgan Stanley an additional $500 billion in assets under management (AUM), bringing its investment management division’s total AUM to nearly $1.2 trillion, with combined revenues of more than $5 billion.

Image source: Morgan Stanley.

“Eaton Vance is a perfect fit for Morgan Stanley,” James P. Gorman, chairman and chief executive of Morgan Stanley, said in a statement. “This transaction further advances our strategic transformation by continuing to add more fee-based revenue to complement our world-class investment banking and institutional securities franchise.”

Currently, Morgan Stanley’s institutional securities business generates more than half of the company’s revenue.

That part of the business has been extremely profitable in recent quarters, but Gorman hopes to better balance the business so the bank can still generate optimal profits when the investment banking division slows.

Eaton specializes in custom investment solutions, separate individual accounts, and environmental, social and governance (ESG) investing and, according to the press release, “fills product gaps” in the bank.

The deal continues Morgan Stanley’s buying spree less than a week after the bank completed its acquisition of E*TRADE for $13 billion.

In premarket trading, Eaton shares reportedly jumped 36.3% to $55.79, while Morgan Stanley shares fell 2.6%, according to CNBC.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

Comments are closed.