The U.S. Federal Reserve Board announced it has approved the application by China Investment Corporation (CIC) to buy up to 10% of voting shares of investment giant Morgan Stanley.
The central bank said CIC, a sovereign wealth fund organized by the Chinese government to invest foreign exchange reserves, will acquire the stakes indirectly. It entered into a stock purchase agreement to acquire voting common stock of Morgan Stanley by August 2010.
CIC currently holds 2.49% of voting common stock of Morgan Stanley. It would own and control up to 10% of Morgan Stanley's voting common stock if the deal is exercised.
CIC has said it does not propose to control or exercise a controlling influence over Morgan Stanley and its indirect investment will be a passive investment.
Based on the foregoing and all the facts of record, the board has approved CIC's application to acquire up to 10% of the voting shares of Morgan Stanley, the Federal Reserve said in a statement.
Morgan Stanley, based in New York, has assets of about 626 billion U.S. dollars.
China Investment Corporation (CIC) describes itself as an investment institution established as a wholly state-owned company under the Company Law of the People’s Republic of China and headquartered in Beijing.
The mission of CIC is to make long-term investments that maximize risk adjusted financial returns for the benefit of its shareholder.
CIC was established on September 29th 2007 with the issuance of special bonds worth RMB 1.55 trillion by the Ministry of Finance. These were, in turn, used to acquire approximately USD 200 billion of China’s foreign exchange reserves and formed the foundation of its registered capital.
Because its financing is grounded in financial instruments and subject to commercial obligations, CIC maintains a strict commercial orientation and is driven by purely economic and financial interests.