Japan’s biggest bank, Mitsubishi UFJ Financial Group Inc (MUFG), said yesterday it would swap US$600 million of its preferred shares in Morgan Stanley for common stock to keep its voting rights stake of the US bank above 20 percent.
Its purchase of 25 million shares is part of Morgan Stanley’s new share offering that was announced on Friday after the US government called on 10 banks to raise more capital.
Morgan Stanley faces a US$1.8 billion shortfall, according to the announcement.
The US bank said it would offer 167.9 million common shares for US$24 each in an effort to raise gross proceeds of US$4 billion.
The transaction will not require MUFG to pay additional cash.
Instead, Morgan Stanley will buy back some preferred shares that MUFG purchased last year in exchange for the new common stock, which, unlike preferred shares, come with voting rights.
MUFG holds a mix of preferred shares and common stock.
It decided to swap its preferred holdings for common stock to ensure that its voting rights do not fall below 20 percent after Morgan Stanley’s new share offering, MUFG spokesman Takashi Takeuchi said.
Since Mitsubishi UFJ gave Morgan Stanley a US$9 billion lifeline in October in the wake of Lehman Brothers’ collapse, the two companies have been examining ways to propel their alliance forward even as the world economy falls on hard times.
In March, Morgan Stanley and MUFG set plans to merge their Japanese brokerage units into a new securities company.
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