Citi has been carrying the value of the joint venture at $23.3 billion, while Morgan Stanley believed the firm’s "fully distributed trading price" was worth $9.5 billion as of June 1, 2012 (as per their agreement). (Read More: Morgan Stanley's $4 Billion Week.)
In the end, Morgan’s value was closer to where Perella came in, but because its determination was not in the middle third of their two values (between $14 billion and $18.2 billion), the two banks were not obligated to use that value. Instead they embarked on their own negotiations that stretched through last evening and wound up with Tuesday’s deal.
While Citi will be forced to record a write-down (as it previously warned was possible), it has the certainty of receiving proceeds of $6.61 billion for its 49 percent stake in the asset between now and June of 2015. Citi expects to record a non-cash GAAP charge to net income of approximately $2.9 billion after-tax in the third quarter, according to Reuters. (Read More: The World's Safest Banks.)
Morgan Stanley, which paid $2.7 billion to Citi when the merger of the two firms took place in 2009, also has the certainty of knowing what it will pay to take full control.
—By CNBC's David Faber