For those keeping track, Morgan Stanley has agreed to sell a 21 per cent equity stake to MUFG, Japan’s largest bank, for a cool $9bn.
This isn’t exactly new - MUFG said last week it would take a stake of up to 20 per cent - but what’s interesting is the market response.
Morgan Stanley’s shares fell almost 20 per cent in New York after the deal was announced. Why? The devil is in the details. Via Reuters:
MUFG will acquire 9.9 percent of Morgan’s common stock at $25.25 a share for $3 billion. The Japanese bank also will acquire $6 billion of perpetual convertible preferred stock paying a hefty 10 percent dividend.
The preferred shares have a conversion price of $31.25 a common share, or Morgan Stanley’s book value at the end of August. After one year, one-half of the preferred stock will convert into common if Morgan Stanley’s stock trades above 150 percent of the conversion price for a certain period.
Have the Japanese been taking notes from Buffett, then?
Related links:
How to say ‘no’ - er, ‘yes’ - in Japanese - FT Alphaville
