Faced with ramped-up capital requirements, Morgan Stanley may elect to peck at Smith Barney over a long stretch of time rather than gobble the brokerage all at once, according to The Wall Street Journal.
The thinking goes that a deal for Morgan Stanley to buy the remaining 49 percent of Smith Barney it doesn’t already own doesn’t have to be consummated as fast as possible. Says The Journal:
On Friday, though, Mr. Gorman, who started as CEO at the beginning of the year, told investors Morgan Stanley has the flexibility to delay part of the purchase of the 18,000-broker joint venture if it wants to, according to people familiar with the meeting.
Morgan Stanley may be training an eye on 2013, when new, tighter Basel III capital standards are set to befall the financial services sector. The way the buyout deal is currently structured, Morgan could begin ramping up its stake in May 2012. Clinging to the cash to avoid regulatory ire has a downside, however: “Some observers say any change in the Smith Barney timetable could be viewed as a sign of weakness, because Morgan Stanley has repeatedly said it wants to be bigger in wealth management,” says The Journal.
mtaylor [at] observer.com | @mbrookstaylor