Morgan Stanley has agreed to buy Eaton Vance Corporation for about $7 billion in a cash-and-stock deal that can quickly expand its investment-management business and add more offerings for retail investors, the bank said.

The transaction is the latest move by Chief Executive James Gorman to reshape Morgan Stanley into one of the biggest global money managers through a series of acquisitions that began just before he took over more than a decade ago.

Morgan Stanley’s wealth and investment management businesses already account for 40-50% of the bank’s revenue. Adding Eaton Vance would nearly double assets under management within the investment management division compared with June 30 and boost the business’s annual revenue by about one-third.

“Eaton Vance is a perfect fit,” Gorman said.

Eaton Vance shareholders will receive $28.25 per share in cash and 0.5833 Morgan Stanley shares for each share they hold, representing a 38% premium to Eaton’s closing price on Wednesday. They will also get a one-time $4.25 dividend paid by Eaton Vance before the deal closes.

Subject to regulatory approvals, the two companies expect the transaction to close in the second quarter of 2021. The deal is good for Morgan Stanley because it will help the bank distribute funds to retail investors since Eaton Vance is the top US distributor of individual separate accounts, Barclays analyst Jason Goldberg said. It may also help grow revenue in an inexpensive way while growing assets, he said.

Reuters