After Bear Stearns, Merrill Lynch, Lehman Brothers and AIG, the international media was buzzing with rumours that Morgan Stanley could be the next victim. Some reports stated that it was weighing a merger with Wachovia Corp. while others cited China's CITIC. As a result, the stock has been facing a lot of turbulence on Wall Street.
All speculation can rest now.
Morgan Stanley yesterday announced that it has entered into a letter of intent to pursue a strategic alliance with the Mitsubishi UFJ Financial Group, Inc. (MUFG), Japan’s largest banking group and the world’s second largest bank holding company with $1.1 trillion in bank deposits.
Morgan Stanley was granted approval yesterday by the U.S. Federal Reserve Board of Governors to become a Federal Bank Holding Company.
The letter of intent relates to an investment in Morgan Stanley that would eventually reach 20 per cent of its equity on a fully diluted basis. The investment would be based on Morgan Stanley’s book value as agreed upon completion of satisfactory due diligence. Upon the closing, a representative of MUFG will join the Morgan Stanley board.