Morgan Stanley (MS.N) said it is selling its remaining stake in MSCI Inc MXB.N, the investment analysis and market index company spun-off from the investment bank in 2007, triggering a 10 percent fall in MSCI shares.
Morgan Stanley has been raising capital in the past two weeks, selling new shares and notes, after federal regulators announced that it would need to boost capital by $1.8 billion to weather a severe downturn.
The company also intends to repay $10 billion it received under the government's bank bailout program.
The bank had indicated that it may divest its entire stake in MSCI and has been selling off portions from time to time since the spin-off.
The latest, and final, offering will consist of 27.7 million shares of MSCI class A shares, the company said.
Based on MSCI's Monday close, the stake is worth $650.6 million.
MSCI, formerly known as Morgan Stanley Capital International, manages more than 100,000 equity, fixed income and hedge fund indices that form the basis for investment funds and derivatives. It also sells Barra risk management tools for portfolio managers.
In a filing with the U.S. Securities and Exchange Commission, MSCI disclosed that it will enter into a separation agreement with Morgan Stanley, agreeing to settle all intercompany amounts owed between them within 90 days of the closing of the offering.
However, the agreement is not expected to materially increase MSCI's expenses.
Shares of the New York-based MSCI fell 10 percent to $21 in after-hours trade. They closed at $23.48 Monday on the New York Stock Exchange.
(Reporting by Amiteshwar Singh in Bangalore; Editing by Anil D'Silva)