Wachovia can still be aquired, hang onto your hats :)
Wachovia Securities Business May Look For PartnerFont size: A | A | A2:55 PM ET 9/29/08 | Dow Jones
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3:02 PM ET 9/29/08
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By Jessica Papini and Brett Philbin
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Wachovia Securities will remain the second largest brokerage and intends to operate independently after Citigroup Inc. (C) acquired Wachovia's Corp. (WB) banking operation. Many observers, however, say the company could be ripe for an acquisition.
After being halted following some pre-market trades, Wachovia's stock finally reopened Monday afternoon and traded at $2, down 80% from its Friday close.
Monday, in a deal arranged by the federal government, Citigroup assumed most of Wachovia's assets and liabilities, but not its retail brokerage and asset management unit, which includes more than 14,600 financial advisors, according to Wachovia. The largest brokerage, Merrill Lynch, which was recently acquired by Bank of America (BAC), has 16,740 financial advisors. BofA and Merrill could together have more than 20,000 advisors.
Previously, Wachovia had pushed to integrate its banking and brokerage businesses. Wachovia's decision to operate as a stand alone brokerage house goes against the broader trend as brokerages are becoming part of banking giants.
Alois Pirker, senior analyst at Aite Group, does not believe "the stand-alone unit is a long-term opportunity for Wachovia," and the firm may not remain independent.
Wachovia Securities, Wachovia Corp.'s retail brokerage arm, includes A.G. Edwards, which it purchased for $6.8 billion. The integration is expected to be completed by the end of the first quarter of 2009. The brokerage unit manages more than $1.1 trillion in assets.
Brokers who recently joined Wachovia from A.G. Edwards are not looking forward to a possible sale. "We aren't even finished with this acquisition, so we definitely don't want to go through another one already," said a broker who was with A.G. Edwards when it was acquired. She said she is also worried about putting her clients through that change again.
Evergreen investments, Wachovia's asset management division, managed around $245 billion for U.S. investors as of June 20, 2008. However, the division has been hit by the financial crisis. Since the start of September, investors have yanked about $6.6 billion from the three Evergreen money market funds that Wachovia moved to shore up, cutting their assets by about one fifth, according to AMG Data Services.
Wachovia's unit could pique the interest of several types of companies. An insurance company that hasn't been tainted in the credit crisis and is accustomed to managing a large sales force, such as a MetLife (MET) or AXA, could be a buyer, said Andre Cappon, president of the CBM Group Inc., a New York consulting firm specializing in financial services.
Foreign investors looking to expand their presence in the U.S. might show interest in acquiring Wachovia, as other options are starting to dwindle. "A foreign bank that wanted to gain a retail footprint such as an HSBC" (HBC) might be a candidate, said Matthew Bienfang, senior research director of brokerage and wealth management at research firm TowerGroup.
Robert Ellis, senior vice president of the Wealth Management Group at Celent, a Boston-based financial research and consulting firm, agrees with Bienfang, stating that HSBC Holdings Plc could be interested in the unit.
HSBC has some wealth management in the U.S., but it is a minor presence compared to what it what it offers globally, said Ellis. HSBC operates a universal bank model, and by combining with a strong brokerage like Wachovia, would also have a universal banking model in the U.S.
Banco Santander SA (STD), reportedly was in talks with Wachovia and Washington Mutual Inc. (WM). The Spanish bank has no asset management or retail brokerage presence in the U.S. Ellis states that the bank could possibly still be interested in Wachovia Securities.
It appears Santander, Spain's largest bank, is in the market for acquisitions. The bank acquired U.K. lender Alliance & Leicester earlier this year, among other deals.
U.S. banks could also be contenders for Wachovia Securities. Charles "Chip" Roame, managing principal of Tiburon Strategic Advisors, a financial-services research and consulting firm, sees two possibilities for Wachovia Securities and Evergreen.
Wells Fargo (WFC), which had reportedly been in talks to acquire Wachovia, could buy those businesses, he said.
Roame also believes Wachovia could remain independent.
David Carroll, who runs Wachovia Securities, Evergreen Investments and Wachovia's retirement and investment products group, could also continue running those businesses as a standalone entity, Roame said.
If Wachovia is sold, and does not remain a stand-alone brokerage house, brokers will have some big changes ahead.
They won't have the lending capabilities or client referrals that they had when they were owned by a bank. "It's not necessarily a bad thing. But it's definitely a culture change for them," a broker at Merrill Lynch said.
Merrill brokers are going through the opposite change in that they are a stand-alone firm that is being bought by a bank.
A spokesperson for Santander declined to comment. HSBC representatives did not immediately return calls for comment.
Representatives from AXA and Wells Fargo & Co. said they don't comment on speculation or rumors. A MetLife representative wasn't immediately available for comment Monday afternoon.
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