Mitsubishi UFJ to buy 21% stake of Morgan Stanley

Morgan Stanley announced Monday that it had completed a previously announced deal to raise capital from the Mitsubishi UFJ Financial Group, a large commercial bank in Japan.

Mitsubishi UFJ, Japan's biggest lender, will buy $US3 billion of common stock and $US6 billion of convertible preferred stock that pays a 10% dividend, the two companies said today in a statement. Morgan Stanley shares fell 15% amid a collapse in bank stocks after a $US700 billion financial-rescue bill failed to pass in Congress today and Wachovia Corp. sold most of its assets to Citigroup Inc

Last week, Morgan Stanley announced that it was working on a deal with Mitsubishi. Negotiations took a full week, and there was some investor concern that Mitsubishi might be backing out. John J. Mack, the chairman and chief executive of Morgan Stanley, wrote to all of the investment bank’s employees on Friday to let them know the deal was moving forward.

Now that the deal is completed, Morgan Stanley still faces large challenges to reinvent itself as a bank holding company.

“This strategic alliance offers a powerful opportunity to accelerate Morgan Stanley’s transition as a bank holding company,” Mr. Mack said in a statement about the deal.