As the Wall Street soap opera at
drags on, brokerage analysts are beginning to put price tags on the investment firm's various operations.
The highly public war-of-words between Morgan Stanley CEO Phil Purcell and a group of ex-investment bankers loyal to the Wall Street firm's storied past is leading to speculation that Morgan Stanley could be on the auction block.
Shares of Morgan Stanley, which underperformed the rest of the brokerage sector last year, are up 8% since some of its alumni went public with their discontent over Purcell's stewardship of the firm. The shares are rising on market speculation that the battle will either result in Purcell's toppling, or cause the company to be broken up or sold.
Fox-Pitt Kelton brokerage analyst David Trone estimates that with shares of Morgan Stanley trading around $58, a potential buyout price for the entire firm would be $71 a share. At that price, a deal would be valued at $78 billion and represent a 22% premium.
But a more likely option, Trone says, is for Morgan Stanley to sell off either its Discover credit card business or retail brokerage operation. In a research note, he values the credit card business at $14 billion and the brokerage group at $11 billion.
"We believe escalating pressure on Morgan Stanley's CEO Phil Purcell and the board increases the probability of divestitures of the Discover and/or retail brokerage units,'' says Trone, in a Friday research report.
Of course, the sale of the credit card business or the brokerage group are two of the main things the group of ex-Morgan Stanley bankers are demanding.
To this point, Purcell appears dead set against meeting those demands, given that the Discover and brokerage business were the heart-and-soul of the old Dean Witter, which acquired Morgan Stanley in a cantankerous merger in 1997.
The brokerage merger never sat well with many of Morgan Stanley's old guard, who always have looked down on Purcell and the Dean Witter crowd, which was once owned by
. It is that persistent culture-clash that's fueling the current feud.
The former bankers went public with their complaints a few days after Purcell pushed aside Stephan Newhouse, who was liked by Morgan Stanely's old guard, as the firm's president. In pushing aside Newhouse, Purcell elevated two of his loyal deputies, Zoe Cruz and Stephen Crawford, to replace him and serve as co-presidents.
In a face-saving measure, Purcell offered Newhouse another job within the firm. But on Friday, the firm disclosed that Newhouse has decided to leave Morgan Stanley.