WORLD> America
|
WORLD> America
|
|
Morgan Stanley considering merger
(Agencies)
Updated: 2008-09-19 08:07 Morgan Stanley is considering a merger with a bank to revive investor confidence after its shares sank 42 percent this week following the collapse of Lehman Brothers Holdings Inc. John Mack, Morgan Stanley's chief executive officer, got a call from Wachovia Corp on Wednesday indicating interest, said a person with knowledge of the matter, declining to be identified because the talks aren't public and may end without an agreement. The New York-based firm is also seeking ways to limit short sales of its stock, the person said. Morgan Stanley and Goldman Sachs Group Inc tumbled the most ever on Wednesday as the deepening credit crunch fueled concerns about their ability to fund themselves without the access to deposits that banks have. A deal involving Morgan Stanley would leave Goldman Sachs as the only independent Wall Street investment bank, after Merrill Lynch & Co sold itself to Bank of America Corp to avoid the fate of bankrupt Lehman. "John Mack certainly needs the stability of the core deposit base at Wachovia at this point, so I can see some of the broad outlines of such a deal, but I think investors would greet that one with some incredulity," Nancy Bush, founder and analyst at NAB Research LLC, said in an interview on Bloomberg Television. "This is a very extraordinary time." Morgan Stanley rose 2.3 percent to $22.25 in New York trading, after falling 24 percent on Wednesday. Hard to duplicate Mack tried unsuccessfully earlier this week to persuade Vikram Pandit, CEO of Citigroup Inc, to combine their two companies, the New York Times reported yesterday, citing people briefed on the talks. "The smartest people at this firm are focused on solutions," Morgan Stanley spokesman Mark Lake said. Wachovia spokeswoman Christy Phillips-Brown said it was bank policy not to comment on "market rumors or merger speculation". The New York Times reported that Wachovia contacted Mack. Wachovia, the fourth-largest US bank, plunged 21 percent after saying it would support $494 million of Lehman credits held by its Evergreen Investments money market funds. The lender, based in Charlotte, North Carolina, has a market value of $19.7 billion, 18 percent less than Morgan Stanley's $24.1 billion. Wachovia Chief Executive Officer Robert Steel, hired in July to replace Kennedy Thompson, is cutting $1.5 billion of expenses and reducing risk to cope with mounting losses from Wachovia's $122 billion of option adjustable-rate mortgages. Very valuable "If you can create a merger between Morgan Stanley and another bank, that franchise will be very valuable because there are not a whole lot of other international investment-banking platforms out there that can duplicate that," said Charles Peabody, partner and research analyst at Portales Partners LLC in New York. "Marrying that funding structure, which Wachovia does have, is a positive." Morgan Stanley and Goldman have defended their business model, saying they have adequate capital and don't need the deposit funding that banks have. Mack, 63, lambasted short sellers for pushing his firm's shares lower. In a memo to employees on Wednesday, Mack said the management committee is "taking every step possible to stop this irresponsible action in the market," and he urged employees to contact clients to reassure them that the firm is performing strongly and has plenty of capital. "There is no rational basis for the movements in our stock or credit-default spreads," Mack wrote in the memo. "We're in the midst of a market controlled by fear and rumors, and short sellers are driving our stock down." The US Securities and Exchange Commission may require hedge funds to disclose their short-sale positions and plans to subpoena the funds for their communication records, Chairman Christopher Cox said in a statement late on Wednesday.
|
