More than ever, you can’t read the list of investment-banking players without a program. The latest changes: Mitsubishi UFJ Financial Group, investing $9 billion in equity in Morgan Stanley, and Bain Capital Partners LLC and Hellman & Friedman LLC, agreed to acquire Neuberger Berman.
In a deal that had been reported in the works for a week, Mitsubishi UFJ’s investment is in exchange for a 21 percent interest in the embattled investment banking giant.
Private equity giants Bain Capital Partners and Hellman & Friedman will be paying $2.15 billion for the fixed income and certain alternative asset management businesses of Lehman Brothers’ Investment Management Division. That purchase is being made in partnership with portfolio managers, the management team, and senior professionals.
Under the Mitsubishi UFJ deal, Japan’s largest financial group — and the world’s second largest bank holding company — will acquire 9.9 percent of Morgan Stanley’s common stock for $3 billion, and will buy $6 billion of convertible preferred stock. The preferred will have a whopping 10-percent dividend and a conversion price of $31.25 per share.
After one year, half of the preferred stock automatically converts into common stock when Morgan Stanley’s stock trades above 150 percent of the conversion price for a certain period and the other half converts on the same basis after year two. Mitsubishi and Morgan also agreed to pursue a global strategic alliance, with particular focus on corporate and investment banking.
According to a joint announcement, the firms already have identified numerous areas of collaboration, including corporate and investment banking, retail banking, and asset management. They said they plan to establish a steering cCommittee to maximize the strategic benefits of their alliance.
“We are delighted to enter into this significant relationship with Morgan Stanley, a firm which has a long standing tradition of providing world-class financial services to a diversified clientele, including governments, corporations and individuals,” said Nobuo Kuroyanagi, Mitsubishi UFJ president and CEO.
“MUFG has deep commercial banking expertise, a strong global platform and a talented management team,” said John J. Mack, Morgan Stanley chairman and CEO.
Morgan Stanley said that it already exceeded the Federal Reserve’s capital and leverage ratio requirements for commercial banks, prior to Mitsubishi’s investment. The $9 billion investment will further bolster Morgan Stanley’s strong capital and liquidity positions, and Morgan Stanley will continue to have one of the highest Tier 1 capital and total capital ratios among bank holding company peers, according to the two companies.
This is not the Japanese banking concern’s only recent transaction in the U.S. this month. Over the weekend, it said that it completed the cash tender offer to purchase all of the outstanding shares of UnionBanCal Corp. that it does not already own. In August, Mitsubishi UFJ, formed in October 2005 after a merger between Mitsubishi Tokyo Financial Group Inc. and UFJ Holdings Inc., launched a tender offer to buy the remaining 35.1 percent outstanding shares of the U.S. bank holding company for 73.50 per share in cash, or about $3.5 billion.