Morgan Stanley agreed to sell its mutual fund business to Invesco Ltd for $1.5 billion, as the Wall Street bank restructures its money-losing asset management division.
Under the deal for the retail asset management business, which includes Van Kampen Investments, Morgan Stanley will get $500 million in cash and a 9.4% stake in Invesco, an independent investment management company.
Morgan Stanley's asset management business has posted $2.64 billion in operating losses since the start of 2008. In July, Chief Executive John Mack promised his firm was “taking steps to deliver better results” in asset management and other crucial businesses.
The deal comes as banks, including Citigroup Inc, Bank of America Corp and Barclays Plc have sold or agreed to sell asset management businesses in recent years, in an effort to raise funds, avoid the appearance of conflict and focus on their main businesses.
Morgan Stanley said the deal would help address some affiliated product sales restrictions faced by Van Kampen portfolio managers since the closing of its Morgan Stanley Smith Barney joint venture with Citigroup.
Morgan Stanley Investment Management (MSIM) will now be comprised of several distinct institutional-focused businesses. The restructured division would have about $267 billion in assets under management on a pro-forma basis as of June 30, 2009.
MSIM's long-only institutional business will now be led by an operating committee, chaired by Stu Bohart, co-head of MSIM.
The deal gives Invesco a business with $119 billion in assets under management across equity, fixed income, alternatives and unit investment trusts.
The transaction has been approved by the boards of both companies and is expected to close in mid-2010.
The deal has elements similar to BlackRock Inc's 2006 agreement to buy Merrill Lynch's asset management business. Merrill Lynch, now part of Bank of America, received nearly half of BlackRock in that deal.
Morgan Stanley has looked at options for its asset management business in the past. It was in formal talks with Janus Capital Group Inc in the spring of 2008 about a deal to combine Janus with Van Kampen and potentially other parts of Morgan Stanley's asset management business.
Those talks fell apart because Morgan Stanley wanted a controlling interest in the combined operation. (Reuters)