MUFG stock sees biggest gain in five years on Morgan
TOKYO (Reuters) - Shares of Mitsubishi UFJ Financial Group (8306.T) posted their biggest jump in five years after Japan's top bank came through with a planned $9 billion investment in struggling U.S. firm Morgan Stanley (MS.N).
Mitsubishi UFJ paid $9 billion for 21 percent of the iconic Wall Street investment bank, all of which it took in preferred shares after rejigging its original agreement to buy a mixture of common stock and preferred shares.
The closing of the deal on Monday helped reassure Wall Street investors, who sent Morgan Stanley's stock rocketing after a week of sharp selling on concern the Japanese bank could back out of the arrangement.
By taking the stake in less risky preferred shares, which also pay a hefty dividend of 10 percent, Mitsubishi UFJ assuaged Tokyo investors who had feared the bank was taking a gamble on the faltering Morgan Stanley.
"There was a lot of concern about this deal at first, but the fact that they were able to change the terms, that they were able to take the stake in preferred shares, that is a positive," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.
Mitsubishi UFJ said late last month it would buy $3 billion in common shares at $31.25 a share and take the rest in preferred shares, but that changed as the U.S. bank's stock went into freefall.
Under the new terms, about $7.8 billion of Mitsubishi UFJ's investment is in preferred shares with a conversion price of $25.25 a common share with no maturity date. The remaining $1.2 billion is in preferred stock that is not convertible and also has no maturity date.
Both series of preferred stock pay a 10 percent dividend, unchanged from the original deal.
The Japanese bank pushed for new terms after Morgan's stake price fell to $9.28 last week, bringing the U.S. bank's value to $10 billion and sparking concern among its customers. Shares of Mitsubishi UFJ finished up by their daily limit of 100 yen at 810 yen, a gain of 14.1 percent and the stock's biggest one day rise since October 2003, when it rose 14.2 percent.
Shares of the bank saw little active trade, however, as they spent most of the day flooded with buy orders.
