Morgan Stanley to buy Eaton Vance for $ 7 billion

Morgan Stanley M.S. 2.03%

Said it is buying fund manager Eaton Vance for $ 7 billion just days after completing its takeover of discount broker E * Trade Financial Corp, continuing to keep the firm’s shift away from trading, Such as money management.

The deal would nearly double the assets that manage up to $ 1.2 trillion on behalf of Morgan Stanley Pension Fund, insurance companies and other clients, and add annual revenue of $ 1.7 billion.

Morgan Stanley’s asset-management arm is the most profitable of the bank’s four divisions, but is also the smallest, and has also been seen as a niche to compete with larger rivals.

Boston-based Eaton Vaughan, founded in 1924, brings in nearly $ 500 billion in assets and enhances Morgan Stanley’s underscribe presence in bonds and sustainable investments.

Morgan Stanley chief executive James Gorman said Eaton Vaughan executives contacted his firm a few months ago and found a receptive buyer, but the bank was first required to complete the acquisition of E * Trade, which he said last week did.

Morgan Stanley’s retail brokerage is already the largest distributor of Eaton Vance Funds, CEO James Gorman said.


Simon Dawson / Bloomberg News

Morgan Stanley’s retail brokerage is already the largest distributor of Eaton Vance funds, Mr. Gorman said. And there are opportunities to take on Eaton Vance’s funds, which are mostly sold overseas in the US, where Morgan Stanley is big.

“It was obvious,” Mr. Gorman said in an interview. “If we didn’t do that, someone else would.”

Eaton Vance shareholders will receive a share of $ 56.50 in cash and stock, a 40% premium that Morgan Stanley is likely to raise the eyebrows of its investors. Morgan Stanley has also been seen as overpaying before, when it paid a similarly large premium to acquire E * Trade, and before that, a company called Solium managed staff stock.

“In January 2009 a lot of people called me a premium [Morgan Stanley was paying] for [brokerage] Smith Barney was very high, ”Mr. Gorman said on Thursday, early in his term, which is now widely seen as a home run. In the Eaton Vance deal, he said: “It’s perfectly priced, but I’m completely comfortable.”

The deal is expected to be completed in the second quarter of 2021.

Write Liz Hoffman at [email protected]

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