DOW JONES NEWSWIRES 
 

Morgan Stanley (MS) confirmed it will sell its retail asset-management business, including the Van Kampen fund unit, to investment manager Invesco (IVZ) for stock and cash valued at $1.5 billion.

The investment bank said the sale, which had been rumored for months, will allow it to focus on its institutional clients.

Invesco will pay $500 million in cash and 44.1 million shares to Morgan Stanley, which will receive a 9.4% interest in Invesco. The deal is expected to close in the middle of next year.

"By taking a minority interest in Invesco, Morgan Stanley will be able to realize significant value in partnership with a world-class player," said Co-President James Gorman.

He also noted that the sale will remove some limits on product sales faced by Van Kampen portfolio managers since the Morgan Stanley Smith Barney joint venture closed.

Invesco said the purchase will expand the number of its investment advisers to about 700, increase its services to clients and strengthen its distribution capabilities.

"This combination of talented teams from both organizations will enhance Invesco's ability to deliver meaningful solutions to our retail and institutional clients around the world, and better position Invesco for long-term success," said Chief Executive Martin L. Flanagan.

Morgan Stanley's shares rose 0.7% to $33.34 in after-hours trading, while Invesco's shares were inactive after closing Monday at $23.12.

Several other banks have sold their fund units, including Bank of America Corp. (BAC), which recently sold most of Columbia Management to Ameriprise Financial Inc. (AMP) for about $1 billion. In a blockbuster deal announced in June, BlackRock Inc. (BLK) said it was buying Barclays Global Investors, a unit of British bank Barclays (BCS), for $13.5 billion.

-By Kathy Shwiff, Dow Jones Newswires; 212-416-2357; kathy.shwiff@dowjones.com