Details on Smith Barney-Morgan Stanley deal

January 12, 2009 | By Jim Kim

Apparently, talks between Citi and Morgan Stanley have progressed the last few days, and the Financial Times says a deal is imminent. For Citi, the benefits are clear: A capital boost of as much as $6 billion. That represents "the difference between the valuation of Smith Barney on its books and the value of its share of the joint venture with Morgan Stanley."

Morgan Stanley gets a 51 percent stake in the venture that would combine their brokerage units. It would also get rights to purchase more of the venture over the next several years. This is a bold move for Citi, one that seems in some respects to be the product of government involvement. Some think this hearkens a break up; we'll see.

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