Witter Buying Morgan Stanley $10 Billion Merger Creates Powerhouse

Article excerpt

Dean Witter, Discover & Co. agreed Wednesday to buy Morgan Stanley Group Inc. for about $10 billion in stock, forming the biggest U.S. securities firm and likely sparking a wave of mergers on Wall Street.

The new firm, to be called Morgan Stanley, Dean Witter, Discover & Co., will have a market capitalization of $21 billion, offices in 38 countries and 3.2 million retail customers. It links Morgan, one of Wall Street's top three investment banks, with Dean Witter, the third-largest brokerage firm for individual investors.

Now the rest of Wall Street is trying to figure out which financial services firm would make the best partner. "You have insurance companies, securities firms and banks and they're going to come in like the Oklahoma Land Rush," said Bruce Wasserstein, the investment banker who advised Dean Witter. "Everyone is thinking if they have to do something now." Shares of both companies rose on the news. So did A.G. Edwards Inc., Bear Stearns Cos. and other brokerages amid speculation they would also become takeover targets. Dean Witter shareholders will own 55 percent of the new company. Morgan Stanley investors will receive 1.65 Dean Witter shares for each of their common shares. The companies called the transaction a merger of equals, noting that they will each have seven seats on the new firm's 14-member board. Dean Witter Discover Chairman and Chief Executive Philip J. Purcell will hold the same titles at the merged company. John Mack, chief executive and president of Morgan Stanley, will be president and chief operating officer. Morgan Stanley Chairman Richard Fisher will be chairman of the executive committee of the board. Combined, the companies aim to better compete with Merrill Lynch & Co., the biggest U.S. securities firm and the one that's best married the businesses of investment banking with brokerage services for individual investors. …

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