Smith Barney
Encyclopedia
Morgan Stanley Smith Barney is a retail brokerage joint venture
between Morgan Stanley
and Citigroup
.
On January 13, 2009, Morgan Stanley
and Citigroup
announced that Citigroup would sell 51% of Smith Barney to Morgan Stanley, creating Morgan Stanley Smith Barney, which was formerly a division of Citi Global Wealth Management. The combined brokerage house has 17,800 brokers and manages $1.7 trillion in client assets. Clients range from individual investors to small- and mid-sized businesses, as well as large corporations, non-profit organizations and family foundations.
in 1873 following the failure of its predecessor Jay Cooke & Company
. Edward B. Smith & Co., founded in 1892 became a significant player in securities underwriting in 1934 when the firm absorbed the professionals from the securities business of Guaranty Trust Company, following the passage of the Glass Steagall Act.
In 1975 Smith Barney merged with Harris, Upham & Co. to form Smith Barney, Harris Upham & Co., which, in 1977, was placed under SBHU Holdings, a holding company
. In 1982, SBHU Holdings was renamed Smith Barney Inc. During the 1980s, the company was known for its television commercials featuring actor John Houseman
, with the catchphrase, "They make money the old-fashioned way. They earn it."
In the late 1980s the retail brokerage firm Smith Barney was owned by Sanford I. Weill
's Primerica Corporation
. Commercial Credit purchased Primerica in 1988, for $1.5 billion ($ today). In 1992, they paid $722 million ($ today) to buy a 27% share of Travelers Insurance and in 1993 acquired Shearson
(which included the legacy business of E.F. Hutton from American Express
. By the end of 1993, the merged company was known as Travelers Group Inc. although the brokerage business continued to operate under the Smith Barney brand.
In 1993 Weill bought stockbroker Shearson back from American Express for $1 billion ($ today), and merged it into Smith Barney. Weill offered Joe Plumeri the presidency of Smith Barney, and he became the President of the merged company that year. He only lasted a year, as he experienced conflicts with existing Smith Barney managers.
In September 1997, Travelers acquired Salomon Inc. (parent company of Salomon Brothers Inc.), for over $9 billion ($ today) in stock, and merged it with its own investment arm to create Salomon Smith Barney. In April 1998 Travelers Group announced an agreement to undertake a $76 billion ($ today) merger between Travelers and Citicorp, creating Citigroup
, which at the time of the merger was the largest single financial services company in the world.
exposure (loans that Citi underwrote but was not able to sell), and had to be rescued by the US federal government. They decided to sell or close "non-core" businesses in order to raise money. On January 13, 2009, Morgan Stanley
and Citigroup announced the merger of Smith Barney with Morgan Stanley's Global Wealth Management Group, with Morgan Stanley paying $2.7 billion cash upfront to Citigroup for a 51% stake in the joint venture. The joint venture operates under the name "Morgan Stanley Smith Barney." Morgan Stanley itself was in a financially cash-strapped position like Citigroup during that time, but they were helped by $9 billion dollar investment from Mitsubishi UFJ Financial Group for a 21% stake in Morgan Stanley.
On June 1, 2009, Morgan Stanley
and Citigroup Inc. announced they closed early on the launch of their joint venture that combines Morgan Stanley's wealth management unit (including many former Dean Witter
assets) with Citi's Smith Barney brokerage division. The new venture, called Morgan Stanley Smith Barney, was supposed to launch during the third quarter. The combined entity generates about $14 billion in net revenue, has 18,500 financial advisers, 1,000 locations worldwide and serves about 6.8 million households.
Citigroup disclosed on September 17, 2009, they would sell their remaining shares in the group to partner Morgan Stanley.
Joint venture
A joint venture is a business agreement in which parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets...
between Morgan Stanley
Morgan Stanley
Morgan Stanley is a global financial services firm headquartered in New York City serving a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 36 countries around the world, with over 600 offices and a workforce of over 60,000....
and Citigroup
Citigroup
Citigroup Inc. or Citi is an American multinational financial services corporation headquartered in Manhattan, New York City, New York, United States. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate...
.
On January 13, 2009, Morgan Stanley
Morgan Stanley
Morgan Stanley is a global financial services firm headquartered in New York City serving a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 36 countries around the world, with over 600 offices and a workforce of over 60,000....
and Citigroup
Citigroup
Citigroup Inc. or Citi is an American multinational financial services corporation headquartered in Manhattan, New York City, New York, United States. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate...
announced that Citigroup would sell 51% of Smith Barney to Morgan Stanley, creating Morgan Stanley Smith Barney, which was formerly a division of Citi Global Wealth Management. The combined brokerage house has 17,800 brokers and manages $1.7 trillion in client assets. Clients range from individual investors to small- and mid-sized businesses, as well as large corporations, non-profit organizations and family foundations.
History
Smith Barney & Co. was formed in 1938 through the merger of Charles D. Barney & Co. and Edward B. Smith & Co.. Charles D. Barney & Co., a New York and Philadelphia based firm, was founded by Charles D. BarneyCharles D. Barney
Charles Dennis Barney was an American stockbroker and founder of Charles D. Barney & Co., one of the predecessors of the brokerage and securities firm Smith Barney....
in 1873 following the failure of its predecessor Jay Cooke & Company
Jay Cooke & Company
Jay Cooke & Company was a U.S. bank from 1861 to 1873. It was the first brokerage house to use telegraph messages to confirm with clients the purchase and sale of securities. Headquartered in Philadelphia, Pennsylvania, it had branches in New York City and Washington, DC...
. Edward B. Smith & Co., founded in 1892 became a significant player in securities underwriting in 1934 when the firm absorbed the professionals from the securities business of Guaranty Trust Company, following the passage of the Glass Steagall Act.
In 1975 Smith Barney merged with Harris, Upham & Co. to form Smith Barney, Harris Upham & Co., which, in 1977, was placed under SBHU Holdings, a holding company
Holding company
A holding company is a company or firm that owns other companies' outstanding stock. It usually refers to a company which does not produce goods or services itself; rather, its purpose is to own shares of other companies. Holding companies allow the reduction of risk for the owners and can allow...
. In 1982, SBHU Holdings was renamed Smith Barney Inc. During the 1980s, the company was known for its television commercials featuring actor John Houseman
John Houseman
John Houseman was a Romanian-born British-American actor and film producer who became known for his highly publicized collaboration with director Orson Welles from their days in the Federal Theatre Project through to the production of Citizen Kane...
, with the catchphrase, "They make money the old-fashioned way. They earn it."
In the late 1980s the retail brokerage firm Smith Barney was owned by Sanford I. Weill
Sanford I. Weill
Sanford I. "Sandy" Weill is an American banker, financier and philanthropist. He is a former chief executive officer and chairman of Citigroup. He served in those positions until October 1, 2003, and April 18, 2006, respectively....
's Primerica Corporation
Primerica Financial Services
Primerica, Inc. is a referral marketer of financial products and services using a hybrid model of direct selling, franchising and distribution....
. Commercial Credit purchased Primerica in 1988, for $1.5 billion ($ today). In 1992, they paid $722 million ($ today) to buy a 27% share of Travelers Insurance and in 1993 acquired Shearson
Shearson
Shearson was the name of a series of investment banking and retail brokerage firms from 1902 until 1994, named for Edward Shearson and the firm he founded, Shearson Hammill & Co...
(which included the legacy business of E.F. Hutton from American Express
American Express
American Express Company or AmEx, is an American multinational financial services corporation headquartered in Three World Financial Center, Manhattan, New York City, New York, United States. Founded in 1850, it is one of the 30 components of the Dow Jones Industrial Average. The company is best...
. By the end of 1993, the merged company was known as Travelers Group Inc. although the brokerage business continued to operate under the Smith Barney brand.
In 1993 Weill bought stockbroker Shearson back from American Express for $1 billion ($ today), and merged it into Smith Barney. Weill offered Joe Plumeri the presidency of Smith Barney, and he became the President of the merged company that year. He only lasted a year, as he experienced conflicts with existing Smith Barney managers.
In September 1997, Travelers acquired Salomon Inc. (parent company of Salomon Brothers Inc.), for over $9 billion ($ today) in stock, and merged it with its own investment arm to create Salomon Smith Barney. In April 1998 Travelers Group announced an agreement to undertake a $76 billion ($ today) merger between Travelers and Citicorp, creating Citigroup
Citigroup
Citigroup Inc. or Citi is an American multinational financial services corporation headquartered in Manhattan, New York City, New York, United States. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate...
, which at the time of the merger was the largest single financial services company in the world.
Sale to Morgan Stanley
During the major financial crisis beginning in late 2008, Citigroup suffered large losses in its retained collateralized debt obligationCollateralized debt obligation
Collateralized debt obligations are a type of structured asset-backed security with multiple "tranches" that are issued by special purpose entities and collateralized by debt obligations including bonds and loans. Each tranche offers a varying degree of risk and return so as to meet investor demand...
exposure (loans that Citi underwrote but was not able to sell), and had to be rescued by the US federal government. They decided to sell or close "non-core" businesses in order to raise money. On January 13, 2009, Morgan Stanley
Morgan Stanley
Morgan Stanley is a global financial services firm headquartered in New York City serving a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 36 countries around the world, with over 600 offices and a workforce of over 60,000....
and Citigroup announced the merger of Smith Barney with Morgan Stanley's Global Wealth Management Group, with Morgan Stanley paying $2.7 billion cash upfront to Citigroup for a 51% stake in the joint venture. The joint venture operates under the name "Morgan Stanley Smith Barney." Morgan Stanley itself was in a financially cash-strapped position like Citigroup during that time, but they were helped by $9 billion dollar investment from Mitsubishi UFJ Financial Group for a 21% stake in Morgan Stanley.
On June 1, 2009, Morgan Stanley
Morgan Stanley
Morgan Stanley is a global financial services firm headquartered in New York City serving a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 36 countries around the world, with over 600 offices and a workforce of over 60,000....
and Citigroup Inc. announced they closed early on the launch of their joint venture that combines Morgan Stanley's wealth management unit (including many former Dean Witter
Dean Witter Reynolds
Dean Witter Reynolds was an American stock brokerage and securities firm catering to retail clients. Prior to its acquisition, it was among the largest retail firms in the securities industry with over 9,000 account executives and was among the largest members of the New York Stock Exchange...
assets) with Citi's Smith Barney brokerage division. The new venture, called Morgan Stanley Smith Barney, was supposed to launch during the third quarter. The combined entity generates about $14 billion in net revenue, has 18,500 financial advisers, 1,000 locations worldwide and serves about 6.8 million households.
Citigroup disclosed on September 17, 2009, they would sell their remaining shares in the group to partner Morgan Stanley.