As a result of its talks with Mitsubishi UFJ Financial Group Inc. - about terms of the $9 billion cash infusion - the Wall Street firm, Morgan Stanley, registered a rise of in German trading. It went up 31% from its close.
The Morgan Stanley stock, which on October 10 sank 60% going down to a 13-year low, climbed to $12.69 at 11:05 a.m. in Frankfurt trading.
The two firms said on Monday that Morgan Stanley has wrapped up plans to sell a part of itself to Mitsubishi UFJ. Under the terms of the deal, Mitsubishi, one of Japan’s largest banks, will acquire a 21% ownership stake of Morgan Stanley in exchange for $9 billion. A majority of that investment will be in the form of convertible preferred stock that paid Mitsubishi a 10% dividend, and the remainder will be in non-convertible preferred stock that too pays a 10% dividend.
According to reports, Mitsubishi had earlier agreed to buy a mix of preferred and common stock of Morgan, but wanted better terms as Morgan’s market value plummeted in recent weeks. On September 29, Mitsubishi had agreed to pay $6 billion for Morgan Stanley convertible preferred shares and $3 billion for common stock.
The closing of the final $9 billion deal comes after much speculation that Mitsubishi might pull out of the investment.
Before the final terms were disclosed, Tom Murphy, managing partner at Family Office Research & Management Ltd. in Sydney had already hinted about renegotiations, saying: “Japanese capital will be a significant player in this crisis, and it won’t be shy capital when it comes to deal- making. The global news isn’t good yet, and investors will continue to question and focus on renegotiating deals where they can.”
The New York Times reported that the US government has assured Mitsubishi UFJ that its investment in Morgan Stanley would be protected. The report further added that this pledge was made to keep Mitsubishi UFJ from walking away, and may serve as a model for future transactions.