Apparently Twinkie-lovers worldwide are clamoring for a piece of this. Read more »
There’s been sort of an impromptu referendum on whether the big US universal banks should be smashed into itty-bitty pieces, and how itty-bitty, and which ones should be smashed first, and for some reason the leading contenders seem to be Citi and Morgan Stanley. Those two seem uninterested in that free advice, though, since they’re now haggling over the price of Morgan Stanley Smith Barney, the joint venture that is slowly migrating from Citi’s bloated clutches into Morgan Stanley’s also apparently bloated clutches. Whee.
Morgan Stanley owns 51% of this wealth management venture, while Citi owns 49%, and MS is looking to exercise an option to buy 14% more at a contentiously negotiated price. Citi carries MSSB on its books at a $22bn valuation and wants Morgan Stanley to pay a bit more than that to buy another chunk of it, while Morgan Stanley carries it at something like a $14bn valuation and wants to pay $9bn for it.* I submit to you that that bid/ask spread is not well calculated to make you feel good about (1) the intellectual rigor and independence of Citi’s and/or Morgan Stanley’s investment banking valuation work or (2) the balance sheet transparency of major banks. Thing (1) is I guess why the parties hired Perella Weinberg to be their neutral appraiser.** Thing (2) sparked Citi to put out an 8-K last week saying “oh btw we might have a huge hit to earnings when we mark down our ‘reasonable and supportable’ $22bn valuation to whatever Perella Weinberg finds,” which would not be great for earnings or Basel I capital or general confidence in Citi.***
Lauria: One of my clients was directly threatened by the White House, and in essence compelled to withdraw its opposition to the deal under threat that the full force of the White House press corps would destroy its reputation if it continued to fight. That’s how hard it is to stand on this side of the fence.
Beckmann: Was that Perella Weinberg?
Lauria: That was Perella Weinberg.