Morgan Stanley's Gorman: We 'fully intend' to buy all of Smith Barney

Morgan Stanley Chief Executive Officer James Gorman said the firm intends to buy the remaining stake in a brokerage joint venture with Citigroup Inc.'s Smith Barney on target dates established in the original deal. “Whenever those first dates trigger, I think May 2012 is the first one, we expect to move forward on that as soon as it triggers,” Gorman, 52, said today at the Securities Industry and Financial Markets Association conference in New York. “We fully intend to buy, as planned, as soon as we possibly can.” Morgan Stanley has flexibility in how fast it may increase its 51 percent stake in a joint venture with Citigroup's Smith Barney brokerage, Glenn Schorr, an analyst at Nomura Holdings Inc. in New York, said in a note to investors last week, based on a meeting with the company. The New York-based firm “is less limited than many believe” on the Smith Barney purchase as it faces increased capital requirements under new rules proposed by the Basel Committee on Banking Supervision, Schorr wrote. The Wall Street Journal reported last week that the firm may delay the full purchase to preserve capital. Morgan Stanley has an option to acquire an additional 14 percent in 2012, 15 percent in 2013 and Citigroup's remaining stake in 2014, a regulatory filing shows. Citigroup has the ability to force Morgan Stanley to buy its stake either in 2015 or a year after Morgan Stanley utilizes its second additional purchase option, the filing shows. “The deal was structured to purchase the remaining pieces at fair market value in what's called an open-ended option,” Gorman said today. “We deliberately negotiated that option so that whatever our capital structure might be, whatever we thought fair market value was at that point, and wherever the integration was, we would be more aggressive or less aggressive in pushing the full acquisition.”