Directors Approve Citigroup, Morgan Stanley Joint Venture

New York, NY (AHN) - A joint venture to merge Citigroup's Smith Barney brokerage unit with Morgan Stanley's wealth management division has been approved by the board of directors of both companies, according to recent reports.

The agreement will give Morgan Stanley a 51 percent majority control of the venture, while Citigroup will receive an upfront payment of $2.7 billion.

Morgan Stanley will also have the opportunity to purchase a larger stake in the joint venture in future years, according to a CNBC report.

The joint venture will create the country's largest brokerage firm, with more than 20,000 financial representatives. Bank of America currently holds the top spot with 16,000 representatives, which it reached after acquiring Merrill Lynch.

Morgan Stanley Co-President James Gorman will serve as chairman of the venture company. Charles Johnston, president of Citigroup's Global Wealth Management business, will serve as the president.

Additional management has yet to be named, but the roles will be filled by employees of the two firms.

For Citigroup, the venture represents the first step in breaking up the all-purpose financial company it has became, heading bank toward more traditional banking.

The deal also provides the bank with well-needed capital as it continues to suffer write-downs from its mortgage portfolio.

The government recently provided Citigroup with loans totaling $45 billion in order for the bank to stave off any liquidity concerns.