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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.
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Publication:Japan Weekly Monitor
Date:May 11, 2009
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