MUFG redefines Morgan Stanley deal

Japan's largest bank Mitsubishi UFJ Financial Group (MUFG) is renegotiating its purchase of a 21 per cent stake in Morgan Stanley.

The Asian firm has agreed to pay $9 billion for the deal, but is seeking to secure more favourable terms.

Instead of receiving all stock in the transaction, MUFG has said it wants convertible shares only.

A source told Reuters that an official announcement will be made this week to amend the original deal which included $6 billion of convertible preferred shares and $3 billion in common stock.

Meanwhile, Morgan Stanley stands to benefit from the US Treasury's $700 billion bank bailout plan after shares in the firm fell by 25 per cent on Friday.

Friday's drop takes the investment bank's total falls for last week to 60 per cent which has prompted industry analysts to suggest treasury secretary Henry Paulson will consider buying a stake to prevent a default.