CHARLOTTE, N.C. -- Wachovia Corp. announced Wednesday that it has agreed to acquire Prudential Financial Inc.'s retail brokerage unit, creating the nation's third-largest brokerage.
The deal, which comes after months of negotiations, combines the firms' retail securities brokerage and clearing operations to create a new business that will be known as Wachovia Securities, the companies said in a statement.
Officials said the new firm should be able to compete better against industry leaders such as Merrill Lynch and Citigroup.
"We are always looking for ways to expand and leverage our distribution network," Wachovia chairman and chief executive Ken Thompson told industry analysts in a conference call. "The opportunity to essentially double in size at little or no cost is compelling at the least."
Charlotte-based Wachovia, the nation's fourth largest bank, would have a 62 percent stake in the new firm, while Newark, N.J.-based Prudential would own the remaining 38 percent.
"No money is trading hands," said Wachovia spokesman Tony Mattera. "Both companies are contributing their brokerage firms to the combined firm in exchange for an ownership stake."
The new firm will have combined client assets of $537 billion and combined estimated net revenues of $4.2 billion in 2002, the companies said, making it the nation's third-largest brokerage.
The firms' combined 12,486 brokers will make up the industry's fourth-largest sales force, they said.
The deal would combine Wachovia's 8,109 brokers with Prudential's 4,377 brokers. The new firm, to be based in Richmond, Va., will have more than 3,500 brokerage locations across the country, including 791 dedicated retail offices.
The largest brokerage overall remains Merrill Lynch & Co., with total assets of $1.2 trillion and more than 14,000 brokers worldwide, according to its latest figures.
Wachovia said the combined brokerage would also trail Citigroup's Salomon Smith Barney and Morgan Stanley in terms of numbers of brokers.
The merger is expected to close in the third quarter, the companies said. The brokerage units will continue doing business under their current names until the merger is final, the statement said.
The new firm will report to Donald A. McMullen Jr., president of Wachovia's Capital Management Group.
Daniel J. Ludeman, currently president and chief executive of Wachovia Securities, will be the president and CEO of the new firm. Wachovia will appoint three members to the firm's board of managers and Prudential will appoint two members.
John Strangfeld, a vice chairman of Prudential Financial and leader of that company's investment division, which includes the retail securities brokerage and clearing operations, will be chairman of the new firm.
Strangfeld has led Prudential Securities for the past two years. He will continue in his position as a vice chairman of Prudential Financial.
"Our two firms are a great fit," said Strangfeld. "This new company makes sense because it gives us the scale necessary to compete and because both parent companies share an investor-focused strategy."
Wachovia Corp., created through the merger of First Union and the old Wachovia, has assets of $342 billion and branches in 11 states and Washington, D.C.
Prudential Financial companies, with approximately $556 billion in total assets, serve individual and institutional customers worldwide and include Prudential Insurance Company, one of the largest life insurance companies in the U.S.
In afternoon trading on the New York Stock Exchange, shares of Prudential fell 62 cents, or 2 percent, to $30.30 while Wachovia fell 42 cents, or 1.2 percent, to $35.23.
On the Net:
Wachovia site: http://www.wachovia.com
Prudential site: http://www.prudential.com