Wachovia, Prudential To Combine Retail Brokerage Operations

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In a deal combining their retail brokerage operations, Prudential Financial Inc. will end up with a 38% ownership stake in the new company, while Wachovia Corp.s stake will be 62%.

Charlotte, N.C.-based Wachovia would fold the Prudential operations into Wachovia Securities and run the combined entity from headquarters in Richmond, Va.

After the combination, the total number of representatives will be 12,486, says a Wachovia spokeswoman.

John Strangfeld, head of Prudentials investment division, would be chairman of the new Wachovia Securities, and Prudential would end up with a 38% ownership stake.

But Strangfeld would report to Donald McMullen Jr., president of Wachovias Capital Management Group, and David Ludeman, president of Wachovia Securities, would be the president of the combined entity.

Wachovia would own a 62% stake, and it would name three of the five board members.

The new Wachovia Securities would be the third largest securities brokerage firm in the United States, with $537 billion in client assets, more than $4 billion in annual revenue and 3,500 brokerage locations, the companies say.

The companies say they hope to complete the deal by Sept. 30.

Matthew McGinness, senior analyst, Cerulli Associates, Boston, says the combination makes the combined firm more attractive as a potential strategic partner, placing it on more secure fitting with asset managers.

Wachovia itself is an amalgamation of a number of different broker/dealers it has acquired over time, McGinness says.

“They each have different characteristics. There are bank broker/dealers, regional broker/dealers and an independent model; each has its own strengths and weaknesses,” he says. Wachovia “will also take on some characteristics of a national full-service broker/dealer with the acquisition of the Prudential advisors.”

In terms of how this might affect Prudential, McGinness says there is uncertainty regarding the culture at Wachovia after a series of acquisitions. On the positive side, scale should prove useful in distributing a proprietary product.

“The combined force gives access to a very large distribution field force,” he says.

Newark, N.J.-based Prudential notes that the deal would include its Private Client Group and Wexford Clearing Services Corp., but that it would exclude its stock research department, its stock sales and trading group, its international private client operations, its international derivatives operations, and its Prudential Bank and Trust unit.


Reproduced from National Underwriter Edition, February 24, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.