Smith Barney Account: Morgan Stanley Closes Deal with Citigroup

In a long-awaited move, Morgan Stanley and Citigroup have finally reached an agreement on the valuation of their joint brokerage firm, Smith Barney. The deal, announced this week, marks a significant victory for Morgan Stanley as it seeks to increase its stake in the company.

The disagreement over the value of Smith Barney has been ongoing since July, when Citi warned in a regulatory filing that the sale could result in a 'significant' non-cash expense for the bank. The two companies hired third-party appraisers at the end of August, with Citigroup valuing Smith Barney at around $22 billion and Morgan Stanley's appraisal value coming in at about 40 percent lower.

Despite these differences, the two banks have been working to resolve their dispute, particularly as Morgan Stanley struggles to make money in a weak economy. CEO James Gorman has been keen to increase Morgan Stanley's stake in Smith Barney, which it originally purchased for $13.5 billion in January 2009.

Under the terms of the agreement, Morgan Stanley will purchase Citigroup's interest in Smith Barney in stages, starting with a 14 percent stake. The deal clears the way for Morgan Stanley to eventually buy out its partner's remaining 49 percent interest, giving it full ownership of the brokerage firm.

The settlement is seen as a positive development for both companies, particularly given the recent struggles faced by Morgan Stanley. In the second quarter, the bank reported a 37 percent drop in investment banking revenue, largely due to regulatory changes that have cut into its more lucrative trading businesses.

Despite these challenges, Morgan Stanley remains committed to growing its stake in Smith Barney and is optimistic about the future of the company. The deal marks an important step forward for both banks as they look to navigate the current economic landscape and position themselves for long-term success.

Smith barney account