Morgan Stanley, in Its Biggest Deal Since Crisis, Courts Future Millionaires
11 Februar 2019 - 1:11PM
Dow Jones News
By Liz Hoffman
Morgan Stanley is making a play for the thousands of employees
in the startup economy who might one day be millionaires.
The Wall Street bank will pay $900 million to acquire Solium
Capital Inc., which manages the stock that corporate employees
receive as part of their pay. The deal, the bank's largest
acquisition since the financial crisis, is set to be announced
Monday.
Solium's 3,000 corporate clients employ 1 million workers and
include startups such as Stripe Inc. and Instacart Inc., whose
employees tend to be younger and have fewer relationships with
traditional financial firms. The luckiest will become millionaires
overnight if their companies go public. Others could get wealthier
over time and buy houses, plan for retirement and invest in the
market.
Chief Executive James Gorman is betting he can convert them into
clients of Morgan Stanley, whose wealth arm manages $2.3 trillion
for 3.5 American households.
"Most people's money is coming through their workplace, so it's
an obvious place for us to be," Mr. Gorman said in an
interview.
Morgan Stanley's existing stock-plan business has about 330
corporate clients including Microsoft Corp. and Ford Motor Co. and
covers 1.5 million employees. But it is geared toward top
executives rather than rank-and-file employees, and Fortune 500
companies rather than startup darlings.
"We didn't historically have a way to serve them," Mr. Gorman
said. "Now we do."
Morgan Stanley will pay 19.15 Canadian dollars a share for
Calgary, Alberta-based Solium, a 43% premium over its Friday
closing price of C$13.36, or about US$10. It expects the deal to
close by June 30.
Regulators appointed by President Trump have signaled they are
more open to acquisitions by big banks, particularly deals for
steadier, less risky businesses.
Mr. Gorman has sounded more acquisitive as he has stabilized
Morgan Stanley's business and increased its profits. The bank
bought a small real-estate firm in 2018 and has been scouting
takeover targets in asset management, the smallest of its four main
businesses.
"Last year was the first time we felt comfortable that we could
even consider [acquisitions]," he said in the interview. "We'd like
to do more."
Morgan Stanley once considered getting out of the stock-plan
business, where it was a distant competitor to Fidelity Investments
Inc. and E*Trade Financial Corp. and lacked the digital offerings
to serve less wealthy clients. In 2016, it outsourced its contracts
to Solium.
Morgan Stanley recently launched an online wealth-management
tool, where it can park smaller accounts until they are big enough
to merit a human adviser. Employees in Solium's plans will start
out there, said Andy Saperstein, who co-heads Morgan Stanley's
wealth business. "We can incubate those relationships," he
said.
Morgan Stanley also plans to build financial-wellness websites
for employees.
Rival Goldman Sachs Group Inc. is doing the same, also in search
of steadier revenues. The firm is expanding its Ayco business,
which offers financial and tax advice to top-tier corporate
executives, down through the employee ranks.
Solium earned C$81 million in revenue through the first nine
months of 2018, up 29% from a year earlier. Its stock, up 30% over
the past year, closed Friday within a penny of its all-time high.
It has a contract with UBS Group AG's wealth-management arm, though
it couldn't be determined whether that will continue after the
acquisition.
Morgan Stanley said the acquisition wouldn't have a meaningful
impact on its 2019 earnings or reduce its planned stock buybacks.
The bank has regulatory approval to repurchase $2.6 billion in
shares before June 30.
Write to Liz Hoffman at liz.hoffman@wsj.com
(END) Dow Jones Newswires
February 11, 2019 06:56 ET (11:56 GMT)
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