M. Stanley group wants spinoff

NEW YORK – A group of former Morgan Stanley executives and dissident shareholders wants to spin off the Wall Street firm’s investment banking business – long the pride of Morgan Stanley – to “regain its stature and reputation,” the group said Thursday.

The proposal would essentially reverse Dean Witter & Co.’s 1997 takeover of Morgan Stanley, which has been a source of bitterness to longtime Morgan Stanley employees, who saw the aggressive retail brokerage as spoiling the company’s culture. Morgan Stanley was acquired by Dean Witter, which took the Morgan Stanley name.

“The proposed spinoff is motivated by a belief that the board of Morgan Stanley faces an immediate crisis and that the firm has been badly served by its present management and leadership,” the group of eight executives and shareholders said in a letter to other shareholders posted on the group’s Web site.

The plan calls for Morgan Stanley’s investment banking division – which handles initial public stock offerings, debt and equity underwriting and a fixed income and commodities business – to be spun off from the rest of the company, leaving Dean Witter with its investment management business, retail brokerage, mutual funds and the Discover card business.

The dissidents’ plan would effectively remove Chairman and Chief Executive Phil Purcell from leading the investment bank, leaving him in charge of the retail brokerage and Discover businesses. The group has been calling for Purcell’s job for weeks, but Morgan Stanley’s board gave Purcell a vote of confidence at an emergency meeting April 30 and refused to make any management changes.

Morgan Stanley is already planning a spinoff of the Discover card business into a separate company, leaving Morgan Stanley with its investment bank and retail brokerage divisions. The dissident group had earlier called the move ineffective.