NEW YORK (AP) -- Morgan Stanley on Friday said it will spin off its Discover Financial Services unit on June 30 to focus on its more lucrative securities business.
The New York-based company had said in December that it would spin off the credit-card unit, without disclosing details. On Friday, it said shareholders will get one share of Discover common stock for every two shares of Morgan Stanley. It expects regular trading to begin July 2 on the New York Stock Exchange under the stock symbol "DFS."
This marks the end of Morgan Stanley's involvement with Discover, which began as a unit of Sears Roebuck & Co. in 1986 and eventually grew into the world's fourth-biggest credit-card brand. Discover has about $5.2 billion in equity, with some $46.3 billion of outstanding loans.
While Discover has been an important slice of Morgan Stanley's revenue stream, there has been continued calls by Wall Street for the company to focus on its more lucrative investment banking and institutional trading business. The nation's second-largest investment house has in the past trailed the kind of profit margins regularly achieved by bigger rival Goldman Sachs Group Inc.
The spin-off is structured as a tax-free dividend. Morgan Stanley is not keeping any shares.
The move comes as rival Visa International plans to go public in 2007, following in the footsteps of Mastercard Inc.'s banner listing earlier this year.
Discover touts more than 50 million card holders, but only 18.4 million active accounts. The unit earned $1.5 billion in 2006 on record revenue of $4.3 billion.
Shares of Morgan Stanley rose $1.03, or 1.2 percent, to $86.07 Friday
Our take on this news: It is about time Morgan Stanley figured this one out! The Discover spin-ff will be a win-win for both companies.
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