Morgan Stanley to acquire Eaton Vance for $7B in cash, stock transaction
Morgan Stanley Investment Management, or MSIM, will be an asset manager with approximately $1.2T of AUM and over $5B of combined revenues.
The company said MSIM and Eaton Vance are highly complementary with limited overlap in investment and distribution capabilities.
The combination will also bring Eaton Vance’s U.S. retail distribution together with MSIM’s international distribution.
The combination will position Morgan Stanley to generate financial returns through increased scale, improved distribution, cost savings of $150M and revenue opportunities.
By financing the transaction with 50% cash, Morgan Stanley will utilize approximately 100bps of excess capital, and the firm’s common equity tier 1 ratio is expected to remain approximately 300bps above the firm’s stress capital buffer requirement of 13.2%.
Eaton Vance Corp., through its subsidiaries, engages in the creation, marketing, and management of investment funds in the United States. It also provides investment management and counseling services to institutions and individuals.
The transaction is expected to be breakeven to earnings per share immediately and marginally accretive thereafter, with fully phased-in cost synergies, and add approximately 100bps to return on tangible common equity.
Under the terms of the merger agreement, Eaton Vance shareholders will receive $28.25 per share in cash and 0.5833x of Morgan Stanley common stock, representing a total consideration of approximately $56.50 per share.
Based on the $56.50 per share, the aggregate consideration paid to holders of Eaton Vance’s common stock will consist of approximately 50% cash and 50% Morgan Stanley common stock.
The merger agreement also contains an election procedure allowing each Eaton Vance shareholder to seek all cash or all stock, subject to a proration and adjustment mechanism.
In addition, Eaton Vance common shareholders will receive a one-time special cash dividend of $4.25 per share to be paid pre-closing by Eaton Vance to Eaton Vance common shareholders from existing balance sheet resources.
It is anticipated that the transaction will not be taxable to Eaton Vance shareholders to the extent that they receive Morgan Stanley common stock as consideration.
The transaction has been approved by the voting trust that holds all of the voting common stock of Eaton Vance. The acquisition is subject to customary closing conditions, and is expected to close in Q2 of 2021.
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