Prudential Financial Inc., the second-largest U.S. life insurer, said it plans to sell its 38 percent stake in the Wachovia Securities brokerage to Wells Fargo & Co.
The stake is worth about $5 billion, or more than $3.7 billion after taxes, Prudential said in a presentation to investors. The sale is expected to take place around Jan. 1, 2010, but could occur sooner, it said.
Prudential and Wachovia Corp combined their retail brokerages in 2003, with Wachovia taking a 62 percent stake in the joint venture. Wells Fargo is buying Wachovia in a transaction expected to close by the end of this month.
Wachovia Securities is one of the three largest U.S. retail brokerages, along with Merrill Lynch & Co. and Citigroup Inc.’s Smith Barney unit.
Separately, Newark, New Jersey-based Prudential said it has applied to participate in the U.S. Treasury’s $700 billion financial industry rescue package. No decision has been made on its request, it said.
Like other life insurers, Prudential is trying to bolster its finances and shore up capital following heavy investment losses. Prudential lost $108 million in the third quarter.
The $5 billion amount represents Prudential’s stake in the joint venture as of Jan 1, 2008, excluding the former A.G. Edwards Inc., another brokerage. Wachovia bought A.G. Edwards last year for $6.4 billion.
Prudential was entitled to quit the joint venture as a result of the A.G. Edwards purchase. That transaction permitted Prudential to decide by Jan 1, 2010, whether to contribute capital to avoid or limit dilution of its ownership stake in Wachovia Securities.
The insurer will treat its financial advisory operations as a divested business beginning in the current quarter.
Shares of Prudential fell 92 cents to $19.62 in premarket trading. They began the year at $93.04.
(Reporting by Jonathan Stempel and Lilla Zuill; editing by John Wallace)
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