Daily Management Review

Morgan Stanley To Acquire Asset Manager Eaton Vance For $7 Billion


Morgan Stanley To Acquire Asset Manager Eaton Vance For $7 Billion
The United States based lender Morgan Stanley has agreed to acquire Eaton Vance, a US based asset management company, for a value of $7 billion, the bank said on Thursday.
According to analysts this deal is a part of the strategy of Morgan Stanley’s CEO James Gorman to further strengthen the businesses of the bank.
Assets worth about $500 billion is under management of the Boston based Eaton Vance. According to the deal agreement, about $1.2 trillion of managed assets and over $5 billion in combined revenue will be held by Morgan Stanley's investment banking division.
"Eaton Vance is a perfect fit for Morgan Stanley," CEO Gorman said in a statement. He added that the acquisition essentially advances the bank’s "strategic transformation by continuing to add more fee-based revenues."
The deal, which is to be completed through a combination of cash and stocks, is expected to be completed by the second quarter of 2021. According to the agreement between the two companies for the acquisition, a combination of cash and stock, or a total of $56.50 a share, and a one-time cash dividend of $4.25 a share before market closing will be allotted to the shareholders of Eaton Vance.
Eaton Vance shares were up 44% in pre-market trading on Thursday, while Morgan Stanley was down 3%.
The acquisition is expected to reduce about 4 per cent of the combined expenses of the group, Morgan Stanley said. That would translate to a total of $150 million in savings every year.
According to reports published last year, acquisitions for both its wealth and investment management businesses were being looked at by Morgan Stanley.
Morgan Stanley could execute a "string of pearls-type acquisitions" and scale up its fixed-income platform over a couple of years by betting on not one, but a "series of answers," said the bank’s CEO Gorman in an earnings call.
Earlier this year, the acquisition of online brokerage eTrade worth a total of $13 billion was closed by the US bank. Stock-plan operator Solium Capital was acquired by Morgan Stanley last year with the aim of adding potential customers to its wealth management business.