Morgan Stanley, Citigroup May Merge Brokerage Units
Morgan Stanley and Citigroup are deep in talks about a merger of their respective brokerage operations, according to people familiar with the situation. The move would help create economies of scale so badly needed by two firms hit hard by the subprime mortgage collapse.
According to unidentified sources, the deal would be structured as a joint venture, but would involve a payment from Morgan Stanley (NYSE: ms) to Citi (NYSE: c) of an
undisclosed sum that would give Morgan the larger stake in the venture. The move would combine Morgan’s brokerage unit with 8,000 brokers and Smith Barney, which has 11,000 brokers, creating the nation’s largest single brokerage, beating Bank of America’s newly acquired Merrill Lynch unit, which has approximately 16,000 brokers.
Further, Morgan Stanley would have the right over a period of years to increase its stake in the joint venture and ultimately buy all of it which could in effect result in the long-term sale of Smith Barney to Morgan Stanley.
Both firms have been the subject of litigation regarding the sale of auction rate securities,preferred stock and structured notes tied to subprime mortgage pools. If you have lost money with either of these companies, please contact our office for a free case evaluation.