Wells Fargo to pay cash for Prudential's stake in brokerage unit

Wells Fargo & Co. today said that it would buy up Prudential Financial Inc.'s minority stake in Wells Fargo Advisors LLC, shelling out cash for the purchase. Previously, Wells Fargo had said that it would use a combination of cash and common stock to buy out Prudential's interest. Wells Fargo did not announce the dollar amount of the purchase. Wells Fargo's purchase of the remaining stake in the brokerage makes sense for it and Prudential, noted Donald H. Putnam, managing partner at Grail Partners LLC. “Wells will make important changes to improve service and clarify the branding,” he wrote in an e-mail. Back in 2003, Prudential and Wachovia Corp. combined their retail brokerages. Wachovia, which became part of Wells Fargo last year, took a 62% stake in the brokerage deal, while Prudential had a 38% slice. The stake was diluted when Wachovia bought A.G. Edwards & Sons Inc. in 2007 and folded it into Wachovia Securities. Prudential is exercising a put option it had received as part of that deal. As previously reported in InvestmentNews, Prudential's insurance unit will get a big boost to its risk-based capital ratio when the carrier completes the sale, according to filings with the SEC. Prudential Financial Inc. estimated that the proceeds from the anticipated sale could add more than 100 points to the risk-based-capital ratio of Prudential Insurance Company of America, as well as add $4 billion in investible funds. As of Sept. 30, the life insurer's risk based capital ratio was estimated to be “comfortably over 400%,” according to the filings The decision to pay all cash for Prudential's stake in the retail brokerage business came a day after the bank said it would pay back $25 billion in bailout money it received from the government. Shares of Wells Fargo rose 69 cents, or 2.7 percent, to $26.18 in late morning trading. Prudential shares rose 30 cents to $49.75. The Associated Press contributed to this story