According to Reuters, Morgan Stanley (MS) has ended its merger talks with the country’s fourth largest banking chain, Wachovia (WB). The former investment bank was engaged in merger talks with North Carolina-based Wachovia last week in an effort to increase the firm’s financial stability and give some reassurance to its investors. To the surprise of many in the Street, and their rivals, the stocks of these powerful companies kept breaking support levels as they were drawn into the crisis of investor confidence.
The move on Morgan’s part, which on Monday announced its conversion from an investment bank to a bank holding company structure, gaining permanent access to Federal Reserve funding and making it easier for the second-largest Wall Street bank holding co. to acquire other banks, comes as Morgan Stanley intends to pursue a strategic alliance with Japan’s Mitsubishi UFJ Financial Group [MUFG].
According to the proposed partnership Morgan plans to sell a stake of as much as 20% to MUFG. The deal may raise $8.5 billion and create a partnership to pursue other opportunities.
Morgan’s alliance with Japan’s largest banking group, further strengthen the bank’s capital position and makes a Wachovia deal less critical, the sources told Reuters. Morgan executives are now focused on ways to expand Morgan’s existing $1.1 trillion bank deposits base and its banking franchise.