Wachovia Corporation agreed to acquire A.G. Edwards Corporation for $6.8 billion in stock. This will vault Wachovia into the second-largest U.S. retail brokerage, behind only Merrill Lynch, with $1.1 trillion in client assets.
This transaction is the largest of the recent takeovers of regional brokerage firms, which are having difficulty fending off hiring of their representatives. Falling commissions in the industry has caused disruptions in sales staffs.
For years there has been speculation over whether A.G. Edwards, a mostly employee owned firm, could maintain its independence and raises new speculation about other large regional brokerages like Raymond James.
The deal will cause Wachovia to surpass Citigroup’s Smith Barney brokerage unit in number of representatives as well as Ameriprise Financial, which claimed to be third. Wachovia said the combined company will have 15,000 financial advisers and an increased presence in 48 of the 50 largest metropolitan areas.
Wachovia has built its brokerage business relatively quickly, largely through the acquisition of Prudential Securities in 2003, and several smaller firms. Prudential Financial Inc. continues to own 38% of Wachovia.
By purchasing A. G. Edwards Wachovia will not only have a larger base to market financial products, but it will nearly double its number of brokerage offices to 1,512. The acquisition of A. G. Edwards will also increase Wachovia’s focus on small investors and give it wider geographic coverage, particularly the Midwest.
A question yet unanswered is whether, with disparities in payout, Wachovia can retain both the A. G. Edwards Brokers as well as its own. Merrill Lynch retained a much smaller number of brokers than expected it bought Advest in December 2005. UBSAG saw an exodus of brokers from Piper Jaffray’s advisory business, which the Swiss bank last year.
Wachovia and its rivals, including Bank of America Corp., are eager to take aim at baby boomers, tens of millions of whom will take control of their retirement assets in the next decade. Wachovia also advertises its services to women and young people.
Shepherd Smith and Edwards represents investors in the recovery of their losses. We have handled many claims against both Wachovia and A. G. Edwards. Our expertise is also valuable to clients seeking to recover from investment firms after mergers, since such claims have unique problems concerning party entity, supervisory changes and documentation. If you or your company has sustained significant investment losses, contact Shepherd Smith and Edwards to schedule a free conficential consultation with one of our attorneys.