Morgan Stanley will pay Eaton shareholders $28.25 per share in cash and 0.5833x of Morgan Stanley common stock, representing a total consideration of approximately $56.50 per share, which is 38% higher than Eaton Vance's closing price on Oct. 7. Additionally, Eaton Vance will pay its shareholders a special, one-time cash dividend of $4.25 per share.
The deal will give Morgan Stanley another $500 billion in assets under management (AUM), bringing total AUM in its investment management division to nearly $1.2 trillion, with combined revenues of more than $5 billion.
"Eaton Vance is a perfect fit for Morgan Stanley," James P. Gorman, Chairman and CEO of Morgan Stanley, said in a statement. "This transaction further advances our strategic transformation by continuing to add more fee-based revenues to complement our world-class investment banking and institutional securities franchise."
Currently, Morgan Stanley's institutional securities business generates more than half of the company's revenue.
This portion of the business has been extremely profitable in recent quarters, but Gorman is hoping to better balance the business so the bank can still produce optimal earnings when the investment banking division slows.
Eaton specializes in customized investment solutions, individual separate accounts, and environmental, social, and governance (ESG) investing, and according to the press release, "fills product gaps" at the bank.
The deal continues Morgan Stanley's shopping spree less than a week after the bank completed its $13 billion acquisition of E*TRADE.
In pre-market trading, shares of Eaton reportedly jumped 36.3% to $55.79, while shares of Morgan Stanley fell 2.6%, according to CNBC.