The capital needs of U.S. banks continues to provide plenty of opportunity for deep-pocketed investors. Enter Mitsubishi UFJ Financial Group Inc., the savior that prevented Morgan Stanley (NYSE:MS) from annihilation last year following the collapse of Lehman Brothers Holdings Inc. Now, the Japanese firm, which owns nearly 21% of Morgan Stanley, is riding back to the aid of the New York-based bank, which the government stress tests say needs an additional $1.5 billion in capital, with a $600 million check to help the firm get started on meeting those requirements.
The Japanese financial firm will pay only $24 per share for 25 million shares on May 13, giving it a significant discount to Friday's closing price of $28.20 a share. But MUFG won't be shelling out any additional cash since the transaction calls for Morgan Stanley to redeem roughly ¥60 billion ($615 million) of nonconvertible preferred shares.
However, the purchase may not look like such a bargain, if Morgan Stanley's stock continues to drop as it has Monday morning. Shares of the New York bank sank over 5% early to a low of $26.53.
MUFG and Morgan Stanley have been hard at work deepening their relationship since the Japanese bank
injected $9 billion into the U.S. bank last October, as MUFG's Nobuyuki Hirano recently
joined Morgan Stanley's board of directors.
MUFG's decision to get even cozier with Morgan Stanley may be a signal that MUFG's top brass thinks the worst is over for the U.S. banking sector. -
George White See Corporate Dealmaker post on Morgan Stanley's boardSee Dealscape post on MUFG investment See Deal Pipeline story on Nikko Cordial (subscription required)
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