On Tuesday, Wells Fargo & Co. (WFC) announced its intention to purchase the 38% stake of Prudential Financial Inc. (PRU) in its retail brokerage joint venture (JV), Wells Fargo Advisors, for a cash payment of $4.5 billion. The deal is likely to close by Dec 31, 2009.
 
The retail brokerage JV was initially launched by Wachovia Corp. (owning 62%) with Prudential in July 2003. However, post Wachovia acquisition in Dec 2008, the JV also became the property of Wells Fargo. The company at the time of Wachovia acquisition had reportedly assumed that it would acquire Prudential’s stake in the near future. The acquisition will now give complete control of affairs to Wells Fargo. Prudential, however, moves ahead with the sale of its stake to boost its finances.
 
Wells Fargo Advisors is currently the third largest retail brokerage firm in the U.S. It is one of the direct retail customer-oriented businesses of the company, providing sound advice and customized investment products, taking care of the risk and return capacities of its customers. Hence, having a strong position in the firm will obviously strengthen the company’s core competencies, helping it grow inorganically as well.
 
The news came in simultaneously with the company’s announcement of raising $12.25 billion through a stock offering by Dec 18, 2009, in order to repay the TARP fund. It appears to be an activity season for Wells Fargo.
 
As the worst of the financial crisis is behind us, we believe that Wells Fargo is diligently working towards making amendments in all its functional areas so as to get its operations back on track, particularly the ones that were affected by the meltdown of the markets. After having a rough patch with credit quality issues and deteriorating house markets, the company is now following global recovery trends. While near term outlook still remains cautious, the long term mode appears to be promising.
Read the full analyst report on “WFC”
Read the full analyst report on “PRU”
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