Morgan Stanley Gets Mitsubishi Infusion

Like a $9 billion shot in the arm, Mitsubishi UFG (MTU) has helped stabilize the current condition of wobbly U.S. investment bank Morgan Stanley (MS) while acquiring 21% of that company.  The Japanese mega-bank’s preferred stock is convertible to Morgan’s common stock at $25.25 — far exceeding Friday’s $10 closing price.

After a 55% positive earnings surprise in Morgan Stanley’s third quarter (ended August), analysts upwardly revised estimate revisions for fiscal year 2008 (ending November), even while lowering estimates for its Q4 and Q109 terms.  It is no secret MS is one of the troubled top-tier Wall Street firms, and Mitsubishi’s investment should provide at very least some near-term stability.

Morgan’s rise to nearly $15 per share this morning — up over 50% — comes on one of the strongest trading mornings in recent weeks.  Mitsubishi UFG shares are up 9% as of around 11am Eastern.  This deal may help detail some of MTU’s growth initiatives, as well.

In August, Zacks senior foreign banks industry analyst Ann Heffron, CFA said this when she downgraded MTU shares from Buy to Hold: “[T]he company’s growth targets, though certainly laudable, are rather ambitious, and we worry that the company may not be able to achieve the desired results in the period specified.”  Perhaps a 21% stake in a newly emboldened Morgan Stanley will make these initiatives more realistic in the medium-term.

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