Morgan Stanley Plans DiscoverSpin-Off

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NEW YORK - (04/05/05) -- Shares of Morgan Stanley advancedmore than 3% Monday on reports that the nation's second largestbrokerage is shopping its Discover Financial Services unit, butlater in the day the company announced it is pursuing a spin-off ofthe credit card unit, instead. The news comes a little over twomonths after Discover completed the $311 million acquisition ofcredit union- and bank-owned PULSE EFT Association. The value ofDiscover was enhanced by both the PULSE deal and last year's courtruling banning MasterCard and Visa from preventing its card issuersfrom issuing competing cards from Discover and American Express.The PULSE acquisition gave the company a relationship with morethan 4,100 financial institutions, including 1,700 credit unions.The decision to spin off Discover comes amidt increasing internalturmoil at Morgan Stanley where as many as a half dozen topexecutives have resigned over the past two weeks. The battle at thebrokerage giant surrounds the old-guard Wall Street bankers who areurging the ouster of CEO Philip Purcell, a survivor of the 1997merger between Morgan Stanley and Dean Witter, which was once ownedby Sears, parent of Discover.

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