Posted on 01/10/2009 4:47:58 PM PST by Broker
NEW YORK -(Dow Jones)- A combination of Citigroup Inc.'s (C) and Morgan Stanley's (MS) brokerage operations would create the country's largest broker. But while the deal may improve Citi's capital ratios, some observers fear the boost would not solve Citi's capital issues.
For Morgan Stanley, which presumably would become the majority owner of the entity created with Smith Barney, the deal would put the company in a better position to take advantage of potential disruptions created by rival Bank Of America's (BAC) integration last week of Merrill Lynch & Co.
Yet even the consideration of separating from its Smith Barney unit has big implications for Citi's structure and governance, and for what it might consider its primary business, observers said. Chief Executive Vikram Pandit has been as resistant to sell big parts of Citi as some investors have been demanding it.
If a deal would happen, it would be "the first step in the monetization of Citi," said William Smith, the president and senior portfolio manager at Smith Asset Management Inc.
Citi is mulling combining its Smith Barney unit with Morgan Stanley, according to the Wall Street Journal. A combined unit would equal roughly 20,000 brokers. Bank of America, the biggest retail broker after its purchase of Merrill, has more than 18,500 brokers.
(Excerpt) Read more at money.cnn.com ...
Citi and MS brokerage/trading have certain "synergies." And as the article suggests, it's all about the balance sheet.
What do you mean? Citi’s balance sheet is a mess. So much money has been injected by Saudis, TARP and on and on. Rubin “the genius” should be in chains taking the perp walk for Sarbanes Oxley after getting paid $20 million a year for 8 years to destroy Citi.
If Smith Barney goes to Morgan it will not be worth that much. I think their balance sheet is so screwed up who knows what it is worth. The full service brokerage model is flawed - I hope you are not a broker like your tag line says.
If you are, start thinking about going independent.
Some of us know they know nothing about management and cookin’. It might be quite the contrary in that Smith Barney is one component of C that is viable and producing cash flow as may suppose is MS/DWR. Independents smell bad these days with wolves like Madoff start to emerge from the woods. May Rubin rot.
Their biggest synergy Redundancies are their biggest synergy. 15,000 employees may be surplused. Mostly over-head types. Low-end producers being pushed out.
that’s not what I mean by “synergies,” but nevermind.
All I know is that I just bought a handful of MS a couple of weeks ago and I’m quite happy so far.
Morgan Stanley set to take Smith Barney Monday 12th January 2009 6:49 am EST Smith Barney, the retail broking business of Citigroup in Australia, may finally change hands if Citi and Morgan Stanley reach agreement to form a venture that would combine their brokerage units. US media (such as Bloomberg) reported over the weekend that Morgan Stanley may pay Citi US$3 billion to get 51 percent of the new company and an option to acquire the rest over three to five years. The Australian reported that Morgan Stanley in Australia is confident the proposed deal will proceed and, as part of that, the domestic Smith Barney business of Citi will directly transfer to Morgan Stanley. At present Morgan Stanley does not operate a retail broking business in Australia. Citi endeavoured to sell the business in the second quarter of 2008. At that stage National Australia Bank was reportedly a keen buyer, though the talks petered out in early June. Last month local media reported that Macquarie Bank were believed to have made an offer to Citi for Smith Barney.
http://www.thesheet.com/nl05_news_selected.php?act=2&stream=1&selkey=7674&hlc=2&hlw=
Citigroup's directors are considering replacing the bank's chairman, Sir Win Bischoff, with lead director and former Time Warner Chairman Richard Parsons as soon as next week, the New York Times reported. Citigroup declined to comment.
God have mercy! Wipi data
Parsons is now a member of the economic advisory team for President-elect Barack Obama. He met with the President-elect on Friday, November 7, along with many other economic experts, to discuss measures to solve the current economic crisis. After New Mexico Governor Bill Richardson withdrew his name from consideration for the position of Secretary of Commerce in the Obama Administration, Parson's name was floated as a possible nominee....
Jan. 12 (Bloomberg) — Citigroup Inc. may book a gain of as much as $10 billion by forming a brokerage venture with Morgan Stanley, helping to replenish capital depleted by the biggest losses in the bank’s 197-year history, a person familiar with the talks said.
NEW YORK (Reuters) - Citigroup Inc. (C.N: Quote) was getting closer to a deal on Sunday to join its Smith Barney retail brokerage business into a joint venture with Morgan Stanley (MS.N: Quote), in a move that could see it get about $2.5 - $3 billion cash, a source familiar with the situation said.
Citi would also gain $5 billion-$6 billion in tangible common equity as a result of revaluing the unit as part of the bigger venture rather than as a stand-alone business, the source said.
The new business would have a combined estimated value of $16 billion to $20 billion, the source said.
A deal could be announced this week but is unlikely to come as soon as Monday, that source said. A second source familiar with the situation said an announcement was expected this week.
It’s a go.
Smith Barney for 30 more minutes.
That’s all folks.
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