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Morgan Stanley to buy stock-plan firm Solium at 43% premium

Morgan Stanley agreed to buy Solium Capital in a bid to add younger clients and tech startups to its stock-plan administration business.

The firm will pay C$19.15 a share in cash, it said of the deal, or about 43% higher than Solium’s closing price on February 8, 2019. The agreement values Solium at about $900 million.

Morgan Stanley will add Calgary-based Solium’s 3,000 stock-plan clients and 1 million participants to its rival offering, which has 320 clients and 1.5 million participants. Solium’s clients include such startups as Stripe, Instacart and Shopify, giving Morgan Stanley’s investment bankers a chance to pitch those firms capital-raising ideas, while its advisers court tech workers as they start to accumulate wealth.

Morgan Stanley by Bloomberg

The large premium Morgan Stanley agreed to pay “might raise a brow, but we think this makes significant strategic sense,” analysts at Evercore said in a note, adding that the link-up “provides a real path towards the organic growth and next generation of clients that many investors have been questioning.”

The Wall Street bank entered into a partnership with Solium in 2016 to administer equity-compensation plans for its corporate clients and their employees. The deal announced on Feb. 11, 2019, won’t affect Morgan Stanley’s buyback plans, and is expected to be completed in the second quarter, according to a statement from the firm.

“The acquisition provides Morgan Stanley with broader access to corporate clients and a direct channel to their employees, as well as a greater opportunity to establish and develop relationships with a younger demographic and service this population early in their wealth accumulation years,” CEO James Gorman said in the statement.