Morgan Stanley (NYSE: MS) announced intentions to complete a deal for fund manager Eaton Vance Corp. (NYSE: EV) for $7 billion with the deal expected to close by the second quarter of 2021. Morgan Stanley’s investment management arm will oversee $1.2 trillion in assets and $5 billion in annual revenue. Morgan Stanley will acquire the firm for $56.50 per share in cash and stock, paying nearly 40% above the fund manager’s closing price the day before the announcement. Morgan Stanley Chief Executive James Gorman defended his decision to pay the large premium for the firm, expressing that “People who hang around trying to buy great companies cheaply never get anything done.”
This acquisition comes with Morgan Stanley’s intention to follow investor preference in a shift towards passive funds and re-emerge as a leading firm in asset management. Morgan Stanley previously owned Van Kampen Investments, but sold the mutual fund to Invesco in 2009 to raise cash following the financial crisis. Morgan Stanley Chief Executive James Gorman spoke about his regret of selling the fund, addressing Invesco Chief Executive Marty Flanagan in a conference call: “Marty, if you’re listening, I wish we’d never sold.”
Eaton Vance Chief Executive Tom Faust approached James Gorman about purchasing the firm, which would only happen after Morgan Stanley complete its takeover of E*Trade. The deal was finalized over a Zoom meeting Thursday October 8.
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