Why Eaton Vance Stock Skyrocketed 57% Last Month

What happened

Shares of investment advisor Eaton Vance (NYSE:EV) soared last month after the company agreed to be acquired by Morgan Stanley (NYSE:MS). According to data from S&P Global Market Intelligence, the stock finished the month up 57%.

As the chart below shows, those gains came almost entirely on Oct. 8, the day the deal was announced.

EV Chart

EV data by YCharts

So what

Shares of Eaton Vance jumped 48% on Oct. 8 when the company announced that it had entered into a definitive agreement to be acquired by Morgan Stanley for an equity value of approximately $7 billion, or roughly $56.50 a share. Eaton Vance’s more than $500 billion in assets under management (AUM) will bring the Morgan Stanley Investment Management division AUM to $1.2 trillion and over $5 billion in annual revenues. Across all of its divisions, Morgan Stanley will oversee more than $4.4 trillion in client assets.

An investor looking at a digital data board.

Image source: Getty Images.

Eaton Vance CEO Thomas Faust said of the deal, which gives Eaton Vance shareholders $28.25 in cash and 0.5833 of Morgan Stanley shares for each Eaton Vance share, “By joining Morgan Stanley, we will be able to further accelerate our growth by building upon our common values and strengths, which are
focused on our commitment to investment excellence, innovation and client service.”

Now what

M&A has been hot in the financial sector lately as trading revenues have surged during the pandemic thanks to volatility and surging equity prices, making up for weakness from low interest rates. Morgan Stanley acquired ETrade earlier this year, showing it making significant efforts to beef up its exposure to trading revenues from stock brokerages and investment managers.

As for Eaton Vance, shareholders will receive a one-time special dividend of $4.25 per share before the deal closes, which is expected in the second quarter of next year.

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