Morgan Stanley has agreed to pay $7bn in cash and shares to buy investment management firm Eaton Vance, the latest in a string of recent acquisitions by the Wall Street bank.

Eaton Vance shareholders will receive a total of $60.75 per share — a 48 per cent premium to Wednesday’s closing price — made up of $28.25 per share in cash and about the same value of Morgan Stanley’s shares, as well as a one-time cash dividend of $4.25 before closing. Shares in Eaton Vance were up 42 per cent in pre-market trading on Thursday.

The deal will add $500bn of assets under management to Morgan Stanley’s investment management division, as well as offering new products in fixed income, adding firepower to a division that delivers under 10 per cent of Morgan Stanley’s revenues in a typical year.

“Eaton Vance is a perfect fit for Morgan Stanley,” said James Gorman, Morgan Stanley’s chief executive, adding that the deal advances the bank’s strategy of “continuing to add more fee-based revenues to complement our world-class investment banking and institutional securities franchise”.

Mr Gorman has spent more than a decade moving Morgan Stanley away from its heavy reliance on volatile investment bank revenues to one with more stable revenues driven by wealth and asset management.

In previous deals, the bank closed its $13bn acquisition of online brokerage ETrade last week, and also bought workplace stock plans provider Solium in 2019, for $900m. Mr Gorman has recently singled out investment management as a potential area for acquisitions.

Morgan Stanley expects to be able to cut about 4 per cent from the combined expense base of Eaton Vance and Morgan Stanley Investment Management, delivering annual savings of $150m. The bank said the deal would be neutral for earnings per share in the short term, and “marginally accretive thereafter”.

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Morgan Stanley has enjoyed a recent run of record-breaking results, including being the only big Wall Street bank to post a rise in earnings in the second quarter.

Via Financial Times