Wachovia Reportedly Will Buy Prudential’s Brokerage Business

Wachovia Corp., the fourth-largest U.S. bank, agreed to acquire Prudential Financial Inc.’s retail brokerage business to almost double its roster of stockbrokers, people familiar with the negotiations said.

The transaction would bring about 5,000 brokers and $1.7 billion of capital to Charlotte, N.C.-based Wachovia, which has about 8,500 brokers.

Prudential would have a minority stake in the new business. Prudential Securities Inc. has lost almost $300 million during the last two years. The transaction was expected to be announced today.

Meanwhile, Wachovia said Tuesday that Leslie M. Baker Jr. would retire as chairman and be succeeded by President and Chief Executive Ken Thompson.

Buying Prudential Securities would give Wachovia CEO G. Kennedy Thompson the world’s second-biggest brokerage amid expectations by some investors that U.S. stocks will rebound after three years of losses.

Wachovia will aim to succeed where Prudential failed by selling products to its 19 million banking customers, investors said.

“They’ve got tons of brokers, and combined with Prudential Securities they’ll be able to leverage that scale,” said William Cohen of Equinox Capital Management. Wachovia “has demonstrated expertise managing the brokerage business on the cost side.”

Fourth-quarter profit from Wachovia’s brokerage rose 40% to $52 million from a year earlier as expenses fell 11%. Revenue fell 6.5% to $543 million.

Prudential and Wachovia declined to comment.

Shares of Prudential gained 20 cents to $30.92 and Wachovia shares gained 65 cents to $35.65, both in New York Stock Exchange trading.

Prudential Chairman and Chief Executive Arthur Ryan has said he wants to focus on businesses that have a rate of return of at least 15%, such as its Japanese life insurance operations.

“Prudential is doing what it said it would do and the restructuring is taking hold,” said Margaret Alexandre Jacobsen, a money manager at Renaissance Fund Advisors in San Francisco.

Newark, N.J.-based Prudential and Wachovia held talks last year on a possible joint venture. The discussions foundered over which company would be in control.

Wachovia is now the fifth-largest U.S. retail broker, and the purchase would make it smaller only than Merrill Lynch & Co.

The bank was formed by the 2001 merger of First Union and Wachovia.

The new firm may try to win clients by touting the independence of its research, a tactic also used by San Francisco-based Charles Schwab & Co.