Morgan Stanley /zigman2/quotes/209104354/composite MS -1.07% confirmed Thursday that is acquiring E*Trade Financial Corp. in an all-stock deal valued at $13 billion. Morgan Stanley will pay 1.0432 of its shares for each E*Trade share, equal to $58.74 based on its closing price Feb. 19. The deal "will significantly increase the scale and breadth of Morgan Stanley's Wealth Management franchise, and positions Morgan Stanley to be an industry leader in Wealth Management across all channels and wealth segments," Morgan Stanley said in a statement. E*Trade has more than 5.2 million client accounts with over $360 billion of retail client assets, adding to Morgan's existing 3 million client relationships and $2.7 trillion of client assets. The deal is expected to close in the fourth quarter. "Importantly, the acquisition marks a continuation of Morgan Stanley's decade-long effort to rebalance the firm's portfolio of businesses so that a greater percentage of firm revenues and income are derived from balance sheet light and more durable sources of revenues," said the statement. "Upon integration, the combined Wealth and Investment Management businesses will contribute approximately 57% of the Firm's pre-tax profits, excluding potential synergies, compared to only approximately 26% in 2010. E*Trade shares were halted for the news premarket, after gaining 25%. Morgan Stanley shares fell 3.9%, but have gained 33% in the last 12 months through Wednesday, while the S&P 500 /zigman2/quotes/210599714/realtime SPX -1.06% has gained 22%.
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Morgan Stanley’s $13 billion E-Trade deal raises questions about ‘too big to fail’