| Nimesh Kampani's JM Financial today announced its decision to part ways with Morgan Stanley, the world's second-largest securities firm and its partner of seven years. |
| Morgan Stanley will pay $445 million for JM Financial's 49 per cent stake in JM Morgan Stanley Securities, the institutional broking company. At the same time, the US firm will sell its equity in investment banking joint venture JM Morgan Stanley Pvt Ltd to JM Financial for $20 million. |
| The deal values the venture at $908 million, against DSP Merrill Lynch's valuation of $1 billion when Merrill bought out Hemendra Kothari's 47 per cent stake in December 2005. |
| Morgan Stanley, which said it will build its own investment banking business in India, joins Goldman Sachs in splitting from local partners and going it alone in the booming investment banking and institutional broking business in the country. Goldman had ended its decade-old relationship with the Kotak Group in March. |
| JM Financial said the decision to separate was Morgan Stanley's. The New York investment bank had been talking of a split for two or three years, JM Financial Chairman Nimesh Kampani told reporters in Mumbai today. |
| "Working in a joint venture is a great advantage as it gives you the best of both worlds, but what do you do if one partner doesn't want to stay on?" he wondered. |
| In a separate release, Hans Schuettler, chief executive officer, Morgan Stanley Asia, said: "It is now the right time for Morgan Stanley to develop a wholly owned full-service India platform. Building on the highly successful institutional equities business and our existing operations in India, we will create an integrated platform that reflects all the businesses the firm conducts globally." |
| JM Financial shares, which rose as much as 18.32 per cent after news of the separation, closed Rs 33.9, or 3.5 per cent, higher at Rs 1,002 on the Bombay Stock Exchange. |
| The transaction will result in the 100-odd employees working in the institutional broking and research division going to Morgan Stanley, while Kampani will retain the 600-odd other executives. A "no-poaching agreement" also comes into play for the former partners. |
| Both parties have agreed that all existing mandates will be executed jointly to ensure transactions are completed seamlessly and that the interests of clients are protected, said Vishal Kampani, managing director and head of the corporate finance division at JM Morgan Stanley. |
| Morgan Stanley said it will build its investment banking, capital market, fixed-income and private wealth management businesses in India. |
| The firm will combine its existing wholly owned businesses in India, including investment management and real estate, with its institutional equities unit. |
| J M Morgan Stanley ranked second after Citigroup Inc among arrangers of stock and convertible bond sales in India last year, handling about 10 per cent of the $18.4 billion raised, Bloomberg data shows. |
| It slipped to the 13th place among merger advisers last year, arranging for 3 per cent of the record $29.8 billion deals, from being the first in 2005. |
| SIGNING OFF: THE BIG THREE |
| December 2005: Hemendra Kothari sold 47% in DSP Merrill Lynch for $ 500 million ( Rs 2,250 crore) |
| March 2006: Kotak Mahindra Bank bought Goldman Sachs' 25% stakes in Kotak Mahindra Capital Company and Kotak Securities for Rs 335 crore |
| February 2007: Morgan Stanley will pay J M Financial $445 million (around Rs 2,000 crore) to acquire the stock broking business in JM Morgan Stanley; JM Financial will pay $20 million to buy Morgan's stake in the joint venture's investment banking business |
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