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| Kampani: In exit mode |
Mumbai, Feb. 22: JM Financial today said it has called off its nearly 10-year association with global investment banker Morgan Stanley.
Under the deal, Morgan Stanley will pay around $445 million (Rs 1,970 crore) to acquire JM Financial’s 45 per cent stake in JM Morgan Stanley Securities Pvt Ltd (JMSPL), an institutional broking company. Simultaneously, JM will acquire Morgan Stanley’s 45 per cent holding in an investment banking company for $20 million.
The decision to end the partnership should not come as a surprise considering the recent developments in investment banking and securities broking space.
In March last year, Goldman Sachs and Kotak Mahindra ended their 14-year relationship when Kotak Mahindra Bank purchased Goldman Sachs’ 25 per cent stake each in Kotak Mahindra Capital Company (KMCC) and Kotak Securities (KS) for Rs 333 crore.
Before that Merrill Lynch paid close to $500 million to boost its stake in DSP Merrill Lynch to 90 per cent from 40 per cent. The split is “at the behest of Morgan Stanley. They have been insisting on the split for almost three years now,” JM Financial group chairman Nimesh Kampani said.
“It is the right time for Morgan Stanley to develop a wholly-owned full service India platform,” Hans Schuettler, chief executive, Asia, Morgan Stanley said. Kampani said the transaction would be completed by the first quarter of 2007-08.
Both the companies have reached an understanding not to poach on each other’s employees for the next two years. However, there is no non-compete clause between them and they can pursue competing businesses. After the split, close to 600 people will remain with JM Financial while around 100 will go to Morgan Stanley. Kampani did not rule out the possibility of JM aligning with another overseas player, if it gets an “good proposal’’.
On his plans after the split, Kampani said JM Financial will now focus on institutional broking. Vishal Kampani, director, JM Financial group, said there will “four cornerstones’’ on which the group will build its businesses. These include capital markets (individual, institutional broking), investment banking, mutual funds and alternate investments. In alternate investments, the group is looking at making aggressive investments in financial ventures.
