Insurance company Prudential looking to sell off stake in brokerage JV with Wachovia

05 December 2008

Prudential Financial Inc. said yesterday it plans to sell its minority stake in retail brokerage Wachovia Securities to Wells Fargo and has applied to tap into the Treasury's capital purchase program.

According to a filing with the Securities and Exchange Commission, Prudential's stake in Wachovia Securities was valued at more than $3.7 billion, after tax, as of 1January, 2008, excluding the AG Edwards Inc. business. It expects the closing of the transaction by 1 January 2010.

Prudential combined its retail securities brokerage with those of Wachovia Corp. in July 2003 to form the St. Louis-based Wachovia Securities. As of 31 December 2007, Prudential owned a 38 per cent interest in the venture, while Wachovia owned the remaining 62 per cent.

The Newark, New Jersey-based insurer said it intends to exercise its right under a "lookback" option to divest its joint venture interests in Wachovia Securities to Wells Fargo & Co., which is acquiring Charlotte-based Wachovia Corp.

The company elected a "lookback" option when Wachovia bought AG Edwards Inc. in October 2007. The option lets Prudential decide whether or not to make a capital contribution to avoid or limit the dilution of its ownership interest in the joint venture. At the end of the lookback period, Prudential has the option to put its interests to Wachovia based on the appraised value of the joint venture, excluding AG Edwards' brokerage business.

Prudential also confirmed that it applied for an investment under the government's capital purchase program, which would result in the US Treasury Department receiving preferred equity in the company. The company did not say how much it is seeking from the government, nor has any determination been made with regard to its participation in the program.