Morgan Stanley seeks more control in China
Investment bank reportedly selling stake in CICC for over $1 billion
By Alistair Barr, MarketWatch
Last Update: 6:05 PM ET Feb 22, 2010
SAN FRANCISCO (MarketWatch) -- Morgan Stanley is reportedly selling a stake in a big Chinese investment-banking joint venture, but the firm will likely invest in another venture in the country that gives it the potential for more control.
Private-equity firms Kohlberg Kravis Roberts & Co. and TPG Capital are close to signing a deal to buy Morgan Stanley's MS stake in China International Capital Corp., the Wall Street Journal reported Monday, citing unidentified people familiar with the situation.
The deal would free up Morgan Stanley to pursue a longtime ambition of entering into a new Chinese securities venture over which it can exercise greater influence, the newspaper added. A spokesman for Morgan Stanley declined to comment.
China International Capital Corp., or CICC, became the first international investment bank to get a license from the country's central bank in 1995. Morgan Stanley invested roughly $35 million for a 35% stake. Other investors included the People's Construction Bank of China and the government of Singapore.
Morgan Stanley has a big investment banking business in China, advising on mergers and acquisitions and initial public offerings. But the CICC joint venture, and the license that came with it, allowed Morgan Stanley to get involved in local investment banking, securities and advisory work.
However, Morgan Stanley was limited in the amount of the joint venture it could own. If the firm sells the CICC stake and sets up another similar joint venture, it may be able to strike a deal that gives it the chance to own a controlling interest in the business in future. China currently limits foreign ownership of such businesses, but that might change in future.
"We believe Morgan Stanley has been seeking a sale of its passive ownership interest in CICC so that it might take a more active management role in a separate China-based joint venture, which may prove more lucrative," Matthew Albrecht, a financials analyst at Standard & Poor's Equity Research, wrote in a note to investors on Monday.
"Chinese regulators are unlikely to approve a second, concurrent joint venture investment," he added.
Morgan Stanley shares climbed 1.1% to close at $27.71 on Monday.
Investment bank reportedly selling stake in CICC for over $1 billion
By Alistair Barr, MarketWatch
Last Update: 6:05 PM ET Feb 22, 2010
SAN FRANCISCO (MarketWatch) -- Morgan Stanley is reportedly selling a stake in a big Chinese investment-banking joint venture, but the firm will likely invest in another venture in the country that gives it the potential for more control.
Private-equity firms Kohlberg Kravis Roberts & Co. and TPG Capital are close to signing a deal to buy Morgan Stanley's MS stake in China International Capital Corp., the Wall Street Journal reported Monday, citing unidentified people familiar with the situation.
The deal would free up Morgan Stanley to pursue a longtime ambition of entering into a new Chinese securities venture over which it can exercise greater influence, the newspaper added. A spokesman for Morgan Stanley declined to comment.
China International Capital Corp., or CICC, became the first international investment bank to get a license from the country's central bank in 1995. Morgan Stanley invested roughly $35 million for a 35% stake. Other investors included the People's Construction Bank of China and the government of Singapore.
Morgan Stanley has a big investment banking business in China, advising on mergers and acquisitions and initial public offerings. But the CICC joint venture, and the license that came with it, allowed Morgan Stanley to get involved in local investment banking, securities and advisory work.
However, Morgan Stanley was limited in the amount of the joint venture it could own. If the firm sells the CICC stake and sets up another similar joint venture, it may be able to strike a deal that gives it the chance to own a controlling interest in the business in future. China currently limits foreign ownership of such businesses, but that might change in future.
"We believe Morgan Stanley has been seeking a sale of its passive ownership interest in CICC so that it might take a more active management role in a separate China-based joint venture, which may prove more lucrative," Matthew Albrecht, a financials analyst at Standard & Poor's Equity Research, wrote in a note to investors on Monday.
"Chinese regulators are unlikely to approve a second, concurrent joint venture investment," he added.
Morgan Stanley shares climbed 1.1% to close at $27.71 on Monday.