Morgan Stanley is close to a deal giving it control of Citgroup’s Smith Barney business and creating the world’s largest retail brokerage, reports Reuters. The joint venture would give Morgan 51% of Smith Barney for up to $3 billion. In addition to the cash, Citi would benefit from the ability to write up the value of Smith Barney, netting the beleaguered bank another $6 billion in post-tax equity, reports Bloomberg.
Citi is hungry for cash after posting net losses of more than $20.3 billion last year; the company received $45 billion in government rescue funds. Analysts say the deal sells out Citi’s future to weather the current crisis. “Unfortunately, they don’t have a lot of choice,” says an analyst. The combined brokerage would be worth up to $20 billion.