Citi, Morgan Stanley brokerage deal seen midweek

NEW YORK, Jan 12 (Reuters) - Citigroup Inc (C.N) and Morgan Stanley (MS.N) are likely to announce a joint venture for their retail brokerage businesses in the middle of the week, a person familiar with the deal said.

Citigroup is essentially selling its Smith Barney business to Morgan Stanley over time.

The two banks are setting up a joint venture combining their retail brokerage businesses. The joint venture will be 51 percent owned by Morgan Stanley, the person said. The deal could value the entire Smith Barney business at around $16 billion, yielding an after-tax gain of $9 billion to $10 billion for Citigroup. When Morgan Stanley buys the rest of Smith Barney over time, it will do so at a market price rather than a price determined now.

The transaction is still being ironed out because of the complexities of setting up a joint venture, but there are no sticking points in negotiations now, the person said. (Reporting by Dan Wilchins; Editing by Lisa Von Ahn)