Morgan Stanley (NYSE:MS) agreed on Monday to sell its retail investment management business, which has posted $2.64 billion in operating losses since the start of 2008, to Atlanta-based firm Invesco (NYSE:IVZ) for $1.5 billion. The purchase price includes $500 million in cash and 44.1 million Invesco shares, making the company Morgan Stanley ’s largest shareholder with a 9.4% stake.
Through this transaction, which includes mutual fund subsidiary Van Kampen Investments that had $86 billion in client money as of June 3, Invesco will gain as a global investment company a diversified business with $119 billion, bringing its assets under management across equity, fixed income, and unit investment trusts to just under $540 billion.
The boards of both companies have approved the deal, which is expected to close by mid-2010 and is subject to customary regulatory, client and fund shareholder approvals.
“By taking a minority interest in Invesco, Morgan Stanley will be able to realize significant value in partnership with a world-class player,” said Morgan Stanley Co-President James Gorman, in a statement.
“The combination of Invesco’s strong and diversified product portfolio with Van Kampen’s own product strengths and leading distribution capabilities will create a formidable new contender in the retail space — with the size and scale necessary to compete in today’s rapidly changing and consolidating marketplace,” Gorman added. “In addition, this transaction will mitigate certain affiliated product sales restrictions faced by Van Kampen portfolio managers since the closing of the Morgan Stanley Smith Barney joint venture.”
This transaction marks the third asset-management sale since June by a major bank hurt by MBS losses. Bank of America (NYSE:BAC) agreed Sept. 30 to sell the Columbia stock and bond funds for $1.2 billion to Ameriprise. The acquisition included $165 billion in funds and individual accounts, bringing Ameriprise’s assets under management to about $379 billion. Barclays Plc agreed in June to deal its Barclay’s Global Investors to BlackRock Inc. (NYSE:BLK) for $13.5 billion, which gave the British bank a 19.9% stake in BlackRock.
At closing, Invesco will have about 700 investment professionals, with a
meaningful presence in all major markets around the globe.