Morgan Stanley buys E*Trade for $19 billion in biggest banking takeover since GFC
The US sharemarket has slipped as China announced an interest-rate cut amid the coronavirus crisis and Morgan Stanley spent $19 billion on the biggest banking takeover since the financial crisis.
Banking
Don't miss out on the headlines from Banking. Followed categories will be added to My News.
US investment bank Morgan Stanley announced Thursday it will buy online trading pioneer E*Trade in a deal valued at $US13 billion ($A19 billion).
It would be the largest acquisition by an American bank since the 2008 global financial crisis, and comes as online brokers are competing fiercely for new customers.
It came as the People’s Bank of China cut its loan prime rate 10 basis points to 4.05 per cent in a move designed to help cushion the Chinese economy from the damage caused by coronavirus outbreak.
The news sparked an early sell-off with the S&P 500 and the Nasdaq Composite slipping off record highs set a day earlier.
The Dow Jones Industrial Average was down more than 180 points, or 0.6 per cent.
The Morgan Stanley transaction, which requires approval from regulators, is the investment bank’s latest move to reinvigorate itself after nearly being crushed by bad investments during the market crash.
The New York-based financial giant has transformed itself from an institution focused on speculation into a wealth manager for the rich and middle class.
The acquisition of E*Trade allows Morgan Stanley to go a step further and manage the money, savings and assets of small investors.
Founded in California, E*Trade helped revolutionise online trading in the 1980s, opening the door to individual investors to invest on Wall Street, avoiding traditional brokers who demanded high fees and often would not work with small investors.
The company offers financial services to small savers and claims five million clients with assets valued at $US360 billion.
The acquisition is expected to be closely scrutinised by regulators determined to avoid the mistakes that led to the 2008 financial crisis.
Elsewhere, the private-equity firm Sycamore Partners has agreed to buy a controlling stake in L Brands’ Victoria’s Secret for $US525 million.
Chairman and CEO Leslie Wexner will step aside once the deal is completed.
Mr Wexner is the longest-serving CEO of an S & P 500 company.
He founded what would eventually become L Brands in 1963 with The Limited retail store, according to the company’s website.
The selling price signifies a marked decline for a brand with hundreds of stores that booked about $US7 billion in revenue last year.
Sales at its stores are in decline because competition is increasing and tastes are changing.
At its peak, the underwear and lingerie brand was known for its catalogue filled with supermodels and a glitzy annual television special that mixed fashion, models and music. Amid its struggles, Victoria’s Secret sales have continued to erode, the show has been pulled from network television and its stock – which traded at close to $US100 in 2015 – now trades at around $US24.
L Brands has also come under scrutiny because Mr Wexner, has ties to the late financier Jeffrey Epstein, who was indicted on sex-trafficking charges.
Mr Wexner has said he completely severed ties with Epstein nearly 12 years ago and accused him of misappropriating “vast sums” of his fortune.
Wexner offered an apology at the opening address of L Brands’ annual investor day in Columbus last fall, saying he was “embarrassed” by his former ties with Epstein.
Originally published as Morgan Stanley buys E*Trade for $19 billion in biggest banking takeover since GFC