Morgan Stanley wants to buy out Citi from venture

Morgan Stanley is interested in buying all of Citigroup Inc’s stake in their wealth management joint venture this year, said people familiar with Morgan Stanley management’s thinking, in what could be a roughly $10-billion deal.

Citigroup management has also expressed interest in exiting the business sooner than outlined under terms of the Morgan Stanley Smith Barney venture the two parties entered in 2009, Nomura analyst Glenn Schorr said.

Under the plan, Morgan Stanley has options to buy the rest of the business in three chunks through 2014, with its first option to buy another 14 per cent stake this May. Citigroup is carrying its 49 per cent stake in Morgan Stanley Smith Barney at a $10.3-billion valuation, while Morgan Stanley’s valuation pegs that remaining stake at $9.7 billion.

It is unclear what price Citi’s remaining stake would fetch if an accelerated deal were to occur this year.