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Capital One Financial Corp
Citigroup Inc. (COF) and Morgan Stanley (MS) hired Perella Weinberg Partners LP to settle a dispute over how much their Morgan Stanley Smith Barney joint venture is worth, people with direct knowledge of the matter said.
The two New York-based banks are asking Perella Weinberg to value a 14 percent stake that Citigroup (C) plans to sell to Morgan Stanley, said two people, who asked for anonymity because the process is confidential. Morgan Stanley already controls 51 percent of the unit, with Citigroup holding the rest.
The banks turned to the New York-based advisory firm, whose founders include Joseph Perella and Peter Weinberg, after Morgan Stanley pegged the brokerage’s fair-market value at about 40 percent of what Citigroup said the venture is worth, triggering the need for an outside appraiser. Morgan Stanley Smith Barney has more than 17,000 advisers and $1.74 trillion in client assets, according to a regulatory filing.
“We’re both mature, grown-up institutions,” Morgan Stanley Chief Executive Officer James Gorman, 54, said in January. “We’ll quickly figure out fair-market value, and if we can’t, then we’ll obviously go to a third party.”
Shannon Bell, a spokeswoman for Citigroup, Morgan Stanley’s Sandra Hernandez and Kara Findlay at Perella Weinberg wouldn’t comment on the assignment, which the Wall Street Journal reported yesterday.
Citigroup, the third-biggest U.S. lender by assets, said this month it may incur a “significant” third-quarter charge after Morgan Stanley submitted the lower valuation. Citigroup estimated its 49 stake was worth $11 billion in a regulatory filing. That means the two banks’ estimates of the total venture’s value are about $13 billion apart.
Perella Weinberg will come up with a fair value for the brokerage by the end of August, according to the filing. The gap between the banks’ estimates will be split into thirds. If Perella’s estimate falls in the middle, the transaction price will be set at that level. If it’s in the upper or lower third, the final price will be the average of Perella’s estimate and the closest bank estimate, according to a procedure Morgan Stanley outlined in a May filing.
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