Morgan Stanley Signs Deal to Buy Eaton Vance Corporation
Posted on 10/08/2020
Eaton Vance was formed in Boston in 1924 and owns a number of firms including Parametric Portfolio Advisors, EVM, Atlanta Capital, and Calvert. Morgan Stanley and Eaton Vance Corporation have entered into a definitive agreement under which Morgan Stanley will acquire Eaton Vance, a fund manangement company over US$ 500 billion in assets under management (AUM), for an equity value of approximately US$ 7 billion. The acquisition is subject to customary closing conditions, and is expected to close in the second quarter of 2021.
“Eaton Vance is a perfect fit for Morgan Stanley,” said James P. Gorman, Chairman and Chief Executive Officer of Morgan Stanley in a press release. “This transaction further advances our strategic transformation by continuing to add more fee-based revenues to complement our world-class investment banking and institutional securities franchise. With the addition of Eaton Vance, Morgan Stanley will oversee $4.4 trillion of client assets and AUM across its Wealth Management and Investment Management segments.”
According to the press release, “By financing the transaction with 50% cash, Morgan Stanley will utilize approximately 100bps of excess capital, and the Firm’s common equity tier 1 ratio is expected to remain approximately 300bps above the Firm’s stress capital buffer (SCB) requirement of 13.2%. The transaction is expected to be breakeven to earnings per share immediately and marginally accretive thereafter, with fully phased-in cost synergies, and add approximately 100bps to return on tangible common equity. Under the terms of the merger agreement, Eaton Vance shareholders will receive $28.25 per share in cash and 0.5833x of Morgan Stanley common stock, representing a total consideration of approximately $56.50 per share. Based on the $56.50 per share, the aggregate consideration paid to holders of Eaton Vance’s common stock will consist of approximately 50% cash and 50% Morgan Stanley common stock. The merger agreement also contains an election procedure allowing each Eaton Vance shareholder to seek all cash or all stock, subject to a proration and adjustment mechanism. In addition, Eaton Vance common shareholders will receive a one-time special cash dividend of $4.25 per share to be paid pre-closing by Eaton Vance to Eaton Vance common shareholders from existing balance sheet resources. It is anticipated that the transaction will not be taxable to Eaton Vance shareholders to the extent that they receive Morgan Stanley common stock as consideration. The transaction has been approved by the voting trust that holds all of the voting common stock of Eaton Vance.”
Advisors
Davis, Polk & Wardwell LLP is advising Morgan Stanley. Wilmer Cutler Pickering Hale and Dorr LLP and DLA Piper LLP (US) are advising Eaton Vance.
Morgan Stanley sees acquisition as a key path for growth. Earlier, Morgan Stanley completed a US$ 13 billion deal for E*Trade.