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LEAD: Citigroup to merge brokerage business into Morgan Stanley+
(Japan Economic Newswire Via Acquire Media NewsEdge) NEW YORK, Jan. 14_(Kyodo) _ (EDS: ADDING INFO IN 4TH GRAF)
Embattled U.S. financial giant Citigroup said Tuesday it has agreed to merge its Smith Barney brokerage unit into Morgan Stanley's brokerage operations.
The deal will involve the two companies unifying their retail brokerage operations into a joint venture they are to newly set up.
Morgan Stanley will acquire a controlling 51 percent stake in the joint venture, to be called Morgan Stanley Smith Barney.
The joint venture will have $1.7 trillion in client assets and some 20,000 financial advisers worldwide, making it the world's largest brokerage targeting individual investors, Citigroup said.
The deal will give the financially strapped Citigroup $2.7 billion in cash.
Citigroup announced the restructuring plan a week before it is expected to release massive fourth-quarter losses amid the prolonged U.S. financial turmoil.
Wall Street has recently been unstable due partly to uncertainty over Citigroup's fate. The financial giant has been bruised by heavy exposure to subprime mortgage loans.
With a total of $45 billion in capital being injected, it has been the biggest recipient of the U.S. government's rescue package for faltering U.S. financial institutions.
The Citigroup-Morgan Stanley transaction, approved by the boards of the two companies, is expected to close in the third quarter of 2009 and be subject to regulatory approval.
Three years after the creation of the joint venture, Morgan Stanley and Citigroup will have various purchase and sale rights for the joint venture. But Citigroup will continue to own a significant stake in the joint venture at least through year five.
"By bringing together Morgan Stanley's and Citi's strong wealth management businesses, we are creating a new industry-leading wealth management franchise," said John Mack, chairman and CEO of Morgan Stanley.
Citigroup is expected to benefit from the transaction by monetizing its investment in its wealth management business, while continuing to benefit from a multi-year earnings stream as it simplifies and streamlines its organizational structure.
"This joint venture creates a peerless global wealth management business and provides tremendous value for Citi," said Citigroup CEO Vikram Pandit.
Copyright ? 2009 Kyodo News International, Inc.
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