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Investment banking: MS and MUFG pluck confusion from complexity

Full merger plans become two subsidiaries; Alliance prevents sale of stake in MS for now.

Morgan Stanley and Mitsubishi UFJ Financial Group have scaled back plans to fully merge their securities operations in Japan, citing "recent trends in the global financial regulatory environment" in a jointly released November 18 update to the original plan announced in March. Rather than create a single joint venture, the parent firms will continue to operate two subsidiaries.

The first, Mitsubishi UFJ Morgan Stanley Securities (already being referred to as MUMSS), will contain the existing wholesale and retail business of Mitsubishi UFJ Securities while gaining the investment banking operation of Morgan Stanley Japan.

The second, Morgan Stanley MUFG Securities (MSMS), will include the remaining non-investment banking operations of Morgan Stanley Japan – namely capital markets underwriting, sales and trading, securitization and prime brokerage. The idea is that MUMSS will take the role of deal origination through a combination of Morgan Stanley’s investment banking expertise and MUFG’s deep client networks in Japan, with the resulting underwriting, sales and trading duties shared between the two entities – both of which will retain those capabilities – according to criteria dictating priority that have yet to be determined.

"We had been talking to MUFG
for a long time before the
current arrangement was decided, the turmoil last year
just gave us an opportunity
to reset these talks and
then come to an agreement"

A senior official at Morgan Stanley, who did not wish to be named but was authorized to respond to Euromoney’s questions about the announcement, said when asked why the firms had changed their plans: "The reasons for this decision are complex if you drill down, but from a broad perspective quite simple: our goal is to take full advantage of both firms’ networks and strengths, and the easiest way to do that is through a two-company structure."The

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