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Morgan Stanley Lands WhatsApp Deal With Grimes to Cap Busy Week

Facebook Inc. (FB)’s $19 billion acquisition of WhatsApp Inc. caps a roller coaster seven days for Morgan Stanley. (MS)

Sole adviser to the deal for WhatsApp, Morgan Stanley has been on three of the four biggest transactions of a busy, albeit young, M&A year. Yet it also missed out on the sale of a long-time client.

Last week, Morgan Stanley and its investment banking chief Robert Kindler took the lead role advising Time Warner Cable Inc. (TWC) on its $45.2 billion sale to Comcast Corp. (CMCSA), an effort that earned the bank a share of $75 million in fees, according to data from New York-based research firm Freeman & Co.

As the largest deal so far this year, it helped put Morgan Stanley at the top of M&A league tables, ahead of competitors like JPMorgan Chase & Co. (JPM) and Goldman Sachs Group Inc.

Then came Tuesday. 

Actavis Plc announced that morning its purchase of Forest Laboratories Inc. (FRX) for $21 billion, the second-largest deal of the year. Forest had been a longtime client to Morgan Stanley, which advised it for years on its fight with shareholder activist Carl Icahn, said a person familiar with the matter. However, JPMorgan and not Morgan Stanley advised Forest on that sale. 

Morgan Stanley was informed of the deal late Monday evening by Forest, said another person familiar with the matter. That transaction pushed JPMorgan to the top of the league tables, data compiled by Bloomberg show.

Photographer: Brent Lewin/Bloomberg

The WhatsApp Inc. mobile-messaging application WhatsApp is displayed on an Apple Inc. iPhone in this arranged photograph taken in Hong Kong. Close

The WhatsApp Inc. mobile-messaging application WhatsApp is displayed on an Apple Inc.... Read More

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Photographer: Brent Lewin/Bloomberg

The WhatsApp Inc. mobile-messaging application WhatsApp is displayed on an Apple Inc. iPhone in this arranged photograph taken in Hong Kong.

Sole Role

Wednesday afternoon, the fourth-largest deal of the year was announced with Facebook’s move to acquire mobile-messaging startup WhatsApp for as much as $19 billion in cash and stock. Morgan Stanley landed the sole advisory role for closely-held WhatsApp, which could earn the bank $35 million to $45 million in fees, estimates Freeman.

Morgan Stanley also advised Suntory Holdings Ltd. on its $16 billion purchase of Beam Inc. on Jan. 13, the year’s third-largest deal.

The WhatsApp deal is a vindication of sorts for Morgan Stanley’s head of technology banking Michael Grimes. Vilified for the Facebook IPO in May 2012 and the resulting 11 percent day-one drop in its share price, Grimes, 47, is lead banker for WhatsApp. Facebook, which initially priced at $38 a share, closed Wednesday at $68.06.

Given Grimes’ familiarity with Facebook’s shares, it was apt that his client WhatsApp will receive as much as $15 billion in Facebook stock in the deal -- which would make WhatsApp’s founders some of the the largest public shareholders of Facebook. A Morgan Stanley spokeswoman declined to comment.

The deal puts Morgan Stanley second behind JPMorgan in the M&A rankings, with just $3.6 billion separating the two.

To contact the reporter on this story: Jeffrey McCracken in New York at jmccracken3@bloomberg.net

To contact the editor responsible for this story: Jeffrey McCracken at jmccracken3@bloomberg.net

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