Morgan Stanley set to spin off Discover Card unit

By Jeremy M. Simon

On March 23, 2007, Morgan Stanley announced long-anticipated plans to spin off its Discover credit card unit in an initial public offering.  Plans for a spin off of Discover were first shared in December 2006. 

Morgan Stanley said it would distribute all outstanding shares of Discover to the bank's shareholders.  According to a filing with the Securities and Exchange Commission, Discover shares will be listed on the New York Stock Exchange under the symbol DFS.

The announcement comes alongside plans by rival Visa to go public in 2007, and after MasterCard issued stock earlier in the year. 

Shareholders have pressed Morgan Stanley to lose Discover as the card issuer continues to struggle in a congested field of larger competitors.  Morgan Stanley absorbed the credit card business when Dean Witter Discover merged with Morgan Stanley in 1997.

Morgan Stanley indicated in the SEC filing that the spinoff will allow Discover and Morgan Stanley management to concentrate on their individual firms' strategic priorities while boosting the competitive positions of both firms.

Discover, with 50 million cardholders, is the fourth-largest U.S. credit card issuer after Visa, MasterCard, and American Express.

Published: March 30, 2007

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