Prudential To Sell Wachovia Securities

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Dec 20, 2009 12:47 pm

Prudential (NYSE: PRU) To Sell Wachovia Securities Stake To Wells Fargo (NYSE: WFC), Net $1.5 Billion





December 18th, 2009 • Related • Filed Under • by mitch

Filed Under: Industry News

Tags: Prudential Financial • Wells Fargo

In a regulatory filing with the Securities and Exchange Commission, Prudential Financial Inc. (NYSE: PRU) stated on Wednesday that it expects to gain about $1.5 billion from the sales of its minority stake in Wachovia Securities.



The financial services and insurance firm is selling the stake to Wells Fargo & Co. (NYSE: WFC) for approximately $4.5 billion. Wells Fargo is the majority owner of Wachovia Securities, a stake it attained last year when it acquired Wachovia.



The purchase agreement between the two financial companies is for an all-cash deal and gives Wells Fargo complete ownership of the retail brokerage joint venture, which involved Wells Fargo Advisors LLC, Prudential and Wachovia Securities.



According to the deal, Wells Fargo will acquire Prudential’s minority interest on or before December 31, 2009.



“We thank Prudential for being a strong partner as we built the third largest retail brokerage firm in the nation,” said Wells Fargo Chief Financial Officer Howard Atkins in a press release.



Prudential Chairman and CEO John Strangfeld stated in the release: “We are pleased to have reached an all-cash agreement with Wells Fargo for the settlement of our interest in the Wachovia Securities joint venture. The settlement will substantially enhance our capital position and financial flexibility going forward.”



Prudential said it’s after tax gain on the sale will be roughly $1.5 billion, while pre-tax profit is estimated at $2.3 billion. The company said the gain will be seen in net income and provide them with more than $3 billion in additional capital for investment.



Additionally, Prudential holds $417 million worth of promissory notes from Wachovia Securities, which are payable within 30 days of a joint venture termination.



Prudential Financial, Inc. is a financial services leader with approximately $641 billion of assets under management as of September 30, 2009.

Dec 20, 2009 2:52 pm

Damn Prudential doesn't even want to be part of the mess

Dec 20, 2009 4:59 pm

I think it is so WFC can sell WS.   Still betting you see UBS/WS.

Dec 20, 2009 5:16 pm

Welcome to broker hell!

Dec 20, 2009 6:51 pm
Shania Twain:

I think it is so WFC can sell WS.   Still betting you see UBS/WS.


Think you are 1/2 right.  Predicting Stifel/WS before the end of 2010, but my guess is sooner than that.
Dec 20, 2009 7:16 pm

Im curious why you think Wells would sell WFA rather than spinoff as an IPO. Allows them to raise capital and if SF really wants to buy they can do it for a premium in the open market.

Dec 20, 2009 7:33 pm

Stifel is a great firm, but it has nowhere near the capital to buy WFA. 

Dec 20, 2009 7:36 pm
mnbondguy:

Stifel is a great firm, but it has nowhere near the capital to buy WFA. 


Why not their stock is on a tear, sell some stock like all these others...
Dec 20, 2009 8:00 pm

WFA is probably worth 8-10b on a bad day, last I looked SF had a market cap about 1b.  If they issued stock to pay, it would essentially be an IPO with the new purchasers in control, and no way could they finance it with debt.  Not going to happen.

Dec 20, 2009 8:14 pm

dont think Stumpf and his henchmen ever wanted WS.   

Dec 20, 2009 10:07 pm

I think we are missing the fact that Pru had a put.  They exercised the put because they need cash.  Very old news.  Not some grand plan of Wells.

Dec 21, 2009 2:11 am

Aside from Albert, all of these posts really make me hope none of you are in the investment business. 

 
Pru Put Valuation gives WFA an approximate value of 18-20 Billion.  Wells very much wants WFA and will be keeping it, and Stifel couldn't dream of such a purchase anyway.
Dec 21, 2009 6:21 am
QB:

Aside from Albert, all of these posts really make me hope none of you are in the investment business. 

 
Pru Put Valuation gives WFA an approximate value of 18-20 Billion.  Wells very much wants WFA and will be keeping it, and Stifel couldn't dream of such a purchase anyway.



That's one poster with sense!!

Dec 21, 2009 6:02 pm

Yep it was a put.  You excercise "puts" when they are in the money. The market value of WFA currently is nowhere near what it was when Pru was granted their put.  If Wells could get anywhere near 18b for WFA, it would be sold tomorrow.

Dec 21, 2009 7:15 pm
QB:




Wells very much wants WFA and will be keeping it,









Oh great to hear that.   



How was last board meeting?