Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Monday, October 13, 2008

Mitsubishi Financial Completes Purchase of Morgan Stanley Stake

Mitsubishi UFJ Financial Group, Inc. (“MUFG”), Japan’s largest financial group and the world’s second largest bank holding company with $1.1 trillion in bank deposits, and Morgan Stanley today announced that MUFG has closed on a $9 billion equity investment in Morgan Stanley that gives MUFG a 21 percent ownership interest in Morgan Stanley on a fully diluted basis.  Under the revised terms of the transaction, MUFG has acquired $7.8 billion of perpetual non-cumulative convertible preferred stock with a 10 percent dividend and a conversion price of $25.25 per share, and $1.2 billion of perpetual non-cumulative non-convertible preferred stock with a 10 percent dividend. MUFG will receive a Morgan Stanley Board seat; the companies will establish a Steering Committee to maximize the strategic benefits of their alliance.

Quoting verbatim from the Morgan Stanley press release:

The MUFG investment further bolsters Morgan Stanley's already strong capital position.  Morgan Stanley's Tier 1 Capital Ratio is now estimated to be more than 15.5 percent on a pro-forma basis as of August 31, 2008.  This is far in excess of the 6 percent required by the Federal Reserve to be treated as well-capitalized and is one of the highest Tier 1 Capital Ratios among bank holding companies peers.  The MUFG investment also reduces Morgan Stanley's leverage ratio to just under 20 times and its adjusted leverage ratio to just over 10 times on a pro-forma basis at August 31, 2008.  In addition, Morgan Stanley has continued to reduce the size of its balance sheet since the end of the third quarter.  As of today, total assets are now under $900 billion, down from $987 billion at August 31, 2008.

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