Morgan Stanley to buy Eaton Vance for about $7bn

Morgan Stanley has agreed to acquire Eaton Vance, a provider of advanced investment strategies and wealth management solutions.

Morgan Stanley has agreed to acquire Eaton Vance, a provider of advanced investment strategies and wealth management solutions. The value of the deal is approximately $7 billion. The deal is expected to close in the second quarter of 2021.

PRESS RELEASE

NEW YORK & BOSTON–(BUSINESS WIRE)–Morgan Stanley (NYSE: MS) and Eaton Vance Corp. (NYSE: EV) have entered into a definitive agreement under which Morgan Stanley will acquire Eaton Vance, a leading provider of advanced investment strategies and wealth management solutions with over $500 billion in assets under management (AUM), for an equity value of approximately $7 billion. The acquisition advances Morgan Stanley’s strategic transformation with three world-class businesses of scale: Institutional Securities, Wealth Management and Investment Management.

Morgan Stanley Investment Management (MSIM) will be a leading asset manager with approximately $1.2 trillion of AUM and over $5 billion of combined revenues. MSIM and Eaton Vance are highly complementary with limited overlap in investment and distribution capabilities. Eaton Vance is a market leader in key secular growth areas, including in individual separate accounts, customized investment solutions through Parametric, and responsible ESG investing through Calvert. A leader in value-add fixed income solutions, Eaton Vance fills product gaps and delivers quality scale to the MSIM franchise. The combination will also enhance client opportunities, by bringing Eaton Vance’s leading U.S. retail distribution together with MSIM’s international distribution.

“Eaton Vance is a perfect fit for Morgan Stanley,” said James P. Gorman, Chairman and Chief Executive Officer of Morgan Stanley. “This transaction further advances our strategic transformation by continuing to add more fee-based revenues to complement our world-class investment banking and institutional securities franchise. With the addition of Eaton Vance, Morgan Stanley will oversee $4.4 trillion of client assets and AUM across its Wealth Management and Investment Management segments.”

“Over many years, Eaton Vance has delivered above-market growth by aligning our business with leading trends in asset management,” said Thomas E. Faust, Jr., Chief Executive Officer of Eaton Vance. “By joining Morgan Stanley, we will be able to further accelerate our growth by building upon our common values and strengths, which are focused on our commitment to investment excellence, innovation and client service. Bringing Eaton Vance’s leading brands and capabilities under Morgan Stanley creates a uniquely powerful set of investment solutions to serve both institutional and retail clients in the U.S. and internationally.”

“Eaton Vance brings strong brand recognition and high quality complementary platforms in key secular growth areas, providing numerous incremental opportunities to increase the reach of our asset management franchise and our value proposition for clients,” said Dan Simkowitz, Head of MSIM. “These two businesses have limited overlap and are combining from positions of strength to create one of the leading asset managers in the world. We look forward to this partnership.”

The transaction is attractive for shareholders and will deliver long-term financial benefits. Both companies have demonstrated industry-leading organic growth and have strong cultural alignment. The combination will better position Morgan Stanley to generate attractive financial returns through increased scale, improved distribution, cost savings of $150MM – or 4% of MSIM and Eaton Vance expenses – and revenue opportunities. By financing the transaction with 50% cash, Morgan Stanley will utilize approximately 100bps of excess capital, and the Firm’s common equity tier 1 ratio is expected to remain approximately 300bps above the Firm’s stress capital buffer (SCB) requirement of 13.2%.

The transaction is expected to be breakeven to earnings per share immediately and marginally accretive thereafter, with fully phased-in cost synergies, and add approximately 100bps to return on tangible common equity.

Under the terms of the merger agreement, Eaton Vance shareholders will receive $28.25 per share in cash and 0.5833x of Morgan Stanley common stock, representing a total consideration of approximately $56.50 per share. Based on the $56.50 per share, the aggregate consideration paid to holders of Eaton Vance’s common stock will consist of approximately 50% cash and 50% Morgan Stanley common stock. The merger agreement also contains an election procedure allowing each Eaton Vance shareholder to seek all cash or all stock, subject to a proration and adjustment mechanism. In addition, Eaton Vance common shareholders will receive a one-time special cash dividend of $4.25 per share to be paid pre-closing by Eaton Vance to Eaton Vance common shareholders from existing balance sheet resources. It is anticipated that the transaction will not be taxable to Eaton Vance shareholders to the extent that they receive Morgan Stanley common stock as consideration. The transaction has been approved by the voting trust that holds all of the voting common stock of Eaton Vance.

The acquisition is subject to customary closing conditions, and is expected to close in the second quarter of 2021.

A conference call to discuss the announced transaction will be held today at 8:30 a.m. ET, hosted by Morgan Stanley Chairman and CEO, James Gorman; Morgan Stanley CFO, Jonathan Pruzan; Morgan Stanley Head of Investment Management, Dan Simkowitz; and Eaton Vance Chairman and CEO, Thomas E. Faust, Jr. The call and presentation will be available at www.morganstanley.com or by dialing 1-877-895-9527 (domestic) and 1-706-679-2291 (international); the passcode is 5966816. To listen to the playback, please visit our website or dial: 1-855-859-2056 (domestic) or 1-404-537-3406 (international); the passcode is 7276598.

About Eaton Vance
Eaton Vance provides advanced investment strategies and wealth management solutions to forward-thinking investors around the world. Through principal investment affiliates Eaton Vance Management, Parametric, Atlanta Capital, Calvert and Hexavest, the Company offers a diversity of investment approaches, encompassing bottom-up and top-down fundamental active management, responsible investing, systematic investing and customized implementation of client-specified portfolio exposures. As of July 31, 2020, Eaton Vance had consolidated assets under management of $507.4 billion. Exemplary service, timely innovation and attractive returns across market cycles have been hallmarks of Eaton Vance since 1924. For more information visit eatonvance.com.

About Morgan Stanley
Morgan Stanley is a leading global financial services firm providing a wide range of investment banking, securities, wealth management and investment management services. With offices in more than 41 countries, the Firm’s employees serve clients worldwide including corporations, governments, institutions and individuals. For further information about Morgan Stanley, please visit www.morganstanley.com