Two Wall Street titans - Morgan Stanley Group Inc. and Dean Witter, Discover & Co. - said Wednesday they have agreed to merge in a $10 billion deal that will create the largest security firm in the world.
The deal between Morgan Stanley, a blue-chip investment bank, and Dean Witter, a retail broker serving individual investors, could begin a rush of consolidation among securities firms.The new company will be called Morgan Stanley, Dean Witter, Discover & Co.
With Morgan Stanley valued in the market at about $9 billion and Dean Witter valued at $12.4 billion, the new firm would have a market capitalization of more than $21 billion, eclipsing industry leader Merrill Lynch & Co.
The new company would manage more than $270 billion in assets, the largest of any securities firm.
The combined company also would be No. 1 in mergers and acquisitions, underwriting initial public stock offerings and credit cards. It would have 409 offices in 38 countries and 9,300 account executives.
It also would be among the leaders in managed loans, sales volume and research.
Under terms of the deal approved Tuesday by the boards of both companies, each Morgan Stanley share would be exchanged for 1.65 Dean Witter common shares.
Both Dean Witter's chief executive, Philip Purcell, and Morgan Stanley President John J. Mack would have senior titles at the new firm.
Purcell will be chairman and chief executive of the new company, while Mack will be president and chief operating officer.
Morgan Stanley shareholders will have about 45 percent of the shares in the new company while Dean Witter shareholders would have about 55 percent.
The deal is subject to approval by regulators and the shareholders of both companies, but is expected to close by midyear.
Morgan Stanley earned $1.6 billion before taxes last year while Dean Witter had pretax income of $1.5 billion.