Morgan Stanley says Mitsubishi UFJ deal on track

NEW YORK (Reuters) - Morgan Stanley said on Tuesday its deal to sell up to 24.9 percent of its voting shares to Japanese bank Mitsubishi UFJ Financial Group <8306.T> was on track to close "imminently," sending its shares rebounding from earlier lows.

Earlier, the stock had fallen as much as 40 percent on speculation that Mitsubishi UFJ could withdraw from the $9 billion deal, despite approval by the Federal Reserve on Monday.

Before the reassurance by Morgan Stanley, the stock had been the top decliner among financials.

"The transaction is expected to close imminently, upon expiration of the Federal Reserve five-day post-approval waiting period," Morgan Stanley spokesman Mark Lake said.

Mitsubishi UFJ would buy a 21 percent stake in Morgan Stanley under the transaction.

Morgan Stanley shares fell as low as $14.13, before trading down 25 percent at $17.65 in late-afternoon trading on the New York Stock Exchange. Shares of Merrill Lynch & Co Inc , a larger investment bank which is being acquired by Bank of America Corp , fell 26 percent at $17.75.

"It is very easy to spook investors right now -- people are scared of everything right now," said Brian Barish, president of Cambiar Investors LLC. "The brokerage firms remain vulnerable because they just had so much leverage and depend on purchased financing."

(Reporting by Phil Wahba and Dan Wilchins, additional reporting by Doris Frankel in Chicago, editing by Richard Chang)

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