Davis Polk & Wardwell is advising Citigroup Inc. on its proposed joint venture with Morgan Stanley that will combine Morgan Stanley’s Global Wealth Management Group and Citi’s Smith Barney retail brokerage units in the US, UK and Australia into a new entity, Morgan Stanley Smith Barney. The joint venture will not include Citi’s Private Bank or Nikko Cordial Securities.

Under the terms of the definitive agreement, Citi will contribute its Smith Barney brokerage business for a 49% stake in the joint venture and a cash payment of $2.7 billion. Morgan Stanley will contribute its Global Wealth Management business for a 51% stake in the joint venture. The transaction has been approved by the boards of directors of Citi and Morgan Stanley and, subject to regulatory approvals and other customary closing conditions, is expected to close in the 3rd quarter of 2009.

The Davis Polk corporate team includes partners George R. Bason Jr., John A. Bick, Carole Schiffman and John K. Knight and associates Ajay B. Lele, H. Oliver Smith, Aly El Hamamsy, Jeffrey M. Glasheen, Lee Hochbaum (not yet admitted) and James P. Richards (not yet admitted). The tax team includes partners Avishai Shachar and Neil Barr and associates Jason Rubin Sussman and Devasish Majumdar (not yet admitted). Partners Randall D. Guynn and Arthur S. Long and associates Lena V. Kiely and Cristina Diaz are providing bank regulatory advice. Partner Lanny A. Schwartz, counsel Gerard Citera and associate Marisol Rubecindo are providing broker-dealer regulatory advice. Partner Kyoko Takahashi Lin and associates Ron M. Aizen and Randy Samson (not yet admitted) are providing benefits advice. Counsel Erin K. Cho is providing ERISA advice. Partner Nora Jordan and associates Gregory S. Rowland and Sophia Hudson are providing investment management advice. Partner Arthur J. Burke is providing antitrust advice. Laura Lea Bryant is the legal assistant on the transaction. All members of the Davis Polk team are based in the New York office.