Mitsubishi UFJ Financial Group And Morgan Stanley Announce Agreement To Convert Morgan Stanley Convertible Preferred Stock To Common Stock

Mitsubishi UFJ Financial Group, Inc. (MUFG) (NYSE: MTU), one of the world's leading financial groups, and Morgan Stanley (NYSE: MS), a leading global financial services firm, today announced that they have entered into an agreement to convert MUFG’s outstanding convertible preferred stock in Morgan Stanley into Morgan Stanley common stock.

Under the terms of the transaction, MUFG will exchange convertible preferred stock with a face value of $7.8 billion and a 10% dividend for 385 million shares of Morgan Stanley common stock, reflecting an increase in the conversion rate of 75 million shares and providing MUFG with an ownership interest in Morgan Stanley of 22.4%. This conversion enhances Morgan Stanley’s Tier 1 Common capital position, aligns MUFG’s interests with those of Morgan Stanley’s common shareholders, and further strengthens the global strategic alliance between the two firms.

Morgan Stanley's Tier 1 Common Ratio is expected to increase by more than 270 basis points as a result of this transaction to approximately 14.5% on a proforma basis as of March 31, 2011. Morgan Stanley’s Tier 1 Capital and Tier 1 Leverage ratios are unaffected by this transaction.

Following conversion, MUFG will account for its investment in Morgan Stanley using the equity method of accounting.

Katsunori Nagayasu, President and Chief Executive Officer of MUFG, said, “We have decided to convert based on the mutual understanding that it would benefit both MUFG and Morgan Stanley and, more importantly, further enhance the strategic alliance. MUFG will now own 22% of Morgan Stanley's common stock, and Morgan Stanley will enhance its capital position though the conversion. Leveraging this excellent development, we intend to deepen our alliance further and maximize business synergies between us.”

James Gorman, President and Chief Executive Officer of Morgan Stanley, said, “This is the right move for both Morgan Stanley and MUFG, and it is a testament to the strength of our unique relationship that we were able to capitalize on this opportunity to reach an agreement in the best interests of both companies. This conversion will result in an industry-leading capital position, further enhance our global strategic alliance with MUFG and ensure that we have substantial flexibility to deliver for clients around the globe.”

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