MUFG to acquire $600 mil. worth of Morgan Stanley common stock

TOKYO, May 9 Kyodo -
Mitsubishi UFJ Financial Group Inc. will acquire $600 million worth of common
stock to be issued by U.S. investment bank Morgan Stanley, with the transaction
set to take place Wednesday, sources close to the case said Saturday.
MUFG will not incur additional costs through the transaction, which will
involve effectively swapping part of the preferred shares the Japanese
financial group holds in Morgan Stanley for common stock, the sources said.
Morgan Stanley said Thursday it will raise capital by selling common stock and
bonds after the U.S. government announced results of its health assessment of
major U.S. banks known as ''stress tests,'' which showed the investment bank
needs to boost capital by $1.8 billion to weather a possible further deepening
of the recession.
MUFG's acquisition of common shares is aimed at covering the anticipated
dilution of the value of shares it holds in Morgan Stanley resulting from the
struggling U.S. bank's additional stock issuance.
Last October, MUFG acquired $9 billion worth of preferred shares in Morgan
Stanley and took a 21 percent stake in it on a fully diluted basis.
The latest plan to obtain the common stock would give MUFG a roughly 2 percent
stake in the investment bank in terms of voting rights, according to the
sources.
If MUFG converts the remaining preferred shares it holds in Morgan Stanley to
common stock, it would be able to secure more than 20 percent of interest in
the bank, the sources said.
==Kyodo