Wells Fargo pays $4.5B in cash for Prudential’s stake in brokerage

Wells Fargo & Co. is shelling out $4.5 billion in cash for Prudential Financial Inc.'s slice of a brokerage joint venture it shared with Wachovia Corp.

Wells Fargo & Co. is shelling out $4.5 billion in cash for Prudential Financial Inc.’s slice of a brokerage joint venture it shared with Wachovia Corp.
Wells Fargo released the official price paid for the ownership share this morning. It anticipates acquiring Prudential’s part of Wells Fargo Advisors LLC on or before Dec. 31, bringing the unit entirely under Wells Fargo’s umbrella.
Prudential Financial expects to reap about $1.5 billion in after-tax generally accepted accounting principles gains from the sale, which will be reflected in the company’s profits but not its adjusted operating income.
Its insurance subsidiary, The Prudential Insurance Company of America, will pick up more than 100 basis points in its risk-based-capital ratio at the end of the year.
Nearly seven years ago, Prudential Financial combined its retail brokerage, Prudential Securities Inc., with that of Wachovia, which became part of Wells Fargo last year. Wachovia originally had a 62% stake in the joint venture, while Prudential had the remainder.
Donald Putnam, managing partner at Grail Partners LLC, said that with Wells Fargo being a “Main Street bank,” he expected “more and more integration” of the brokerage unit into Main Street banking over the next year or so. “This may be a good thing, given how good Wells is with clients,” he said. “But it will be a tough thing for the remnants of the Wall Street type brokers.”
Mr. Putnam added that while Wells may be headquartered in San Francisco, “it’s a very Midwestern company in its values and its operating culture.”
Prudential is now exercising a put option it received as part of a 2007 deal in which Wachovia bought A.G. Edwards & Sons Inc. and folded it into Wachovia Securities, thus diluting Prudential’s share.