Levin Zhu Yunlai and Morgan Stanley
When John Mack rejoined Morgan Stanley as chairman and CEO in 2005, one of the biggest assets of the Wall Street super-investment bank was a man called Levin Zhu Yunlai. Now the two are barely on speaking terms.
To Mack, Zhu’s reluctance to move China International Capital Corp (CICC) from stock underwriting to trading has seen CICC lag far behind rival, Citic Securities, as China’s equity market tripled in size to match that of Japan’s, at US$4 trillion. More painfully, potential buyers of Morgan Stanley’s 34.3% stake in CICC have, because of Zhu, cut their offers from US$1 billion to US$600 million.
Zhu is CEO of CICC, a 13-year old investment bank set up by five shareholders including the Government of Singapore Investment Corp. and Hong Kong tycoon Payson Cha. He is also the son of former Chinese prime minister and economic tsar, Zhu Rongji. The younger Zhu’s superb connections had raked in huge gains for CICC. In 2006 CICC was abruptly included as an underwriter for the US$12 billion flotation of the Industrial & Commercial Bank of China, replacing Goldman Sachs at the 11th hour.
But today underwriting is no longer as lucrative, and Morgan Stanley – hard hit by the subprime crisis – is desperate to sell assets to raise funds. But Mack has a hard time convincing buyers to come onboard unless he can convince Zhu to change his stance. Can he appeal on past friendship? Or does he have to sweeten the deal for Zhu, who last year earned US$17 million as CEO?