Morgan Stanley Makes Second Major Purchase Of 2020, Acquiring Eaton Vance

Morgan Stanley (MS) said on Thursday that it entered into a definitive agreement to acquire asset manager Eaton Vance Corp. (EV) in a deal valued at $7 billion.

Morgan Stanley has just completed a $13 billion takeover of discount broker E-Trade Financial Corp.

Under the terms of the latest agreement, Eaton Vance stockholders will receive $28.25 per share in cash and 0.5833 of a share of Morgan Stanley common stock, representing a total consideration of about $56.50 per share. Morgan Stanley will pay half of the consideration in cash, the other half in stock.

The $56.50 figure represented a 38% premium over Eaton Vance shares’ closing price as of Wednesday. However, Eaton Vance stockholders can elect to receive all cash or all stock.

In addition, Eaton Vance common shareholders will also receive a one-time special cash dividend of $4.25 per share to be paid by Eaton Vance pre-closing.

The transaction is expected to be “breakeven” to earnings per share immediately and “marginally accretive” thereafter, Morgan Stanley said. Subject to customary closing conditions, the merger is expected to close in the second quarter of 2021.

At closing, Morgan Stanley’s subsidiary, Morgan Stanley Investment Management, or MSIM, will have about $1.2 trillion of assets under management and more than $5 billion of combined revenues.

The company noted that MSIM and Eaton Vance are “highly complementary with limited overlap in investment and distribution capabilities.”

“Eaton Vance is a perfect fit for Morgan Stanley,” said James P. Gorman, chairman and chief executive officer of Morgan Stanley. “This transaction further advances our strategic transformation. ...”

The deal with Eaton Vance continues Morgan Stanley’s “shift away from trading toward steadier, simpler businesses like money management,” The Wall Street Journal reported.

Bloomberg noted that Morgan Stanley’ asset-management arm has lagged behind the comparable business of rival Goldman Sachs Group Inc. (GS).