Just days off of closing a $13 billion acquisition of E*Trade, Morgan Stanley said today that it would acquire Eaton Vance for about $7 billion in cash and stock.
Morgan Stanley wants to
scale up its investment management division by adding Eaton Vance's
roughly $500 billion in assets. Morgan
Stanley Investment Management will have about $1.2 trillion in assets once
the deal closes, with more than $5 billion revenue.
It is "the latest
sign of accelerating consolidation in the asset-management industry," Leslie
Norton wrote today. Besides Morgan Stanley's pair of
acquisitions, just last week Trian Fund Management took
minority stakes in Invesco and Janus Henderson and urged the
pair to merge.
Morgan Stanley executives
are certainly excited about buying Eaton Vance. They forecast $150 million in
cost savings, and a greater appreciation of Morgan Stanley Investment
Management by the market. The deal could close early next year.
CEO James
Gorman talked up the benefits of the transaction on a
call with analysts and investors this morning:
Our competitor Charles
Schwab is trading at 20 times earnings and
we’re trading at 10 times earnings. It makes absolutely no sense. Moody’s just upgraded us Friday night before this
happened and this is clearly credit positive. If we traded at 14 to 15 times
earnings, this stock would be a hundred bucks. We’re rerating Morgan Stanley.
Morgan Stanley stock ended
the day up 0.6%, at $49, while shares of Eaton Vance soared 48.1%, to
about $4 above the $56.50 deal price.
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