Wachovia reps welcome takeover by Wells Fargo

Uncertainty over firm's future lifts in wake of Citi's decision to end its acquisition bid

Oct 12, 2008 @ 12:01 am

By Dan Jamieson

Brokers at Wachovia Securities LLC are relieved that the back-and-forth saga over the fate of their parent company has ended.

Late last Thursday, Citigroup Inc. of New York said that it was ending talks with Wells Fargo and Co. about how to divvy up the assets of Charlotte, N.C.-based Wachovia Corp. Citigroup said that it won't stand in the way of Wachovia's takeover by Wells Fargo but plans to pursue a lawsuit against the San Francisco bank.

Wells Fargo quickly reaffirmed that it is proceeding with the Wachovia acquisition.

That news was a relief to brokers at Wachovia Securities of St. Louis.

"Most guys I talk to were all saying, 'Just pick one [buyer], and let's get on with it.' The only thing we don't want is uncertainty," said a representative at a firm in the Southeast, who asked not to be identified.

"I'm glad we've got the answer," added a Wachovia broker on the West Coast, who also asked not to be identified.

After Citigroup last month initially moved to buy Wachovia's banking assets, observers quickly questioned whether the stub piece of Wachovia, sans the bank, could stand on its own.

"As a stand-alone [brokerage firm], Wachovia didn't have the balance sheet to do it," said recruiter Bill Willis, founder of Willis Consulting Inc. in Palos Verdes Estates, Calif. "So these [Wachovia] guys are safe for now [and] will benefit from having a large organization [as a parent]."

The angst over Wachovia's fate has caused some Wachovia Securities clients to leave, brokers said.

The Wachovia rep on the West Coast said he has lost several million-dollar accounts.

But the rep in the Southeast said that clients are more concerned about the bank than the securities unit.

Meanwhile, during the market meltdown last week, brokers themselves were focused more on clients than on the prospect of Wells Fargo taking over.

The Southeast broker took the Wells Fargo news in stride.

"This will be my sixth [firm name] change in 20 years, and I'm still at the same desk," he said. "Nothing [will be] different from what we do now other than our business cards."

Mr. Willis, though, said that Wells Fargo faces a complicated integration.

Wachovia Securities has 14,600 reps, including the 6,000 or so it picked up when it acquired A.G. Edwards & Sons Inc. of St. Louis.

Wells Fargo has about 2,600 reps. Its broker-dealer, Wells Fargo Investments LLC, offers a number of platforms, including online trading.

FEW DETAILS

"How do they integrate their current sales force into the Wachovia sales force?" Mr. Willis asked. "What kind of autonomy do they give [Wachovia Securities]?"

Wells Fargo didn't provide any details last week as to what the combined entity will look like.

"We haven't discussed that yet," said Wachovia Securities spokeswoman Teresa Dougherty.

But Wachovia brokers might see continued efforts to incorporate banking products into their businesses. Wachovia Corp. has encouraged such synergies, with Wachovia Securities chief executive Danny Ludeman being one of the biggest cheerleaders for the "universal-banking model."

Wells Fargo chairman Dick Kovacevich echoed that theme last week."We're combining the industry's No. 1-ranking customer service culture of Wachovia with the industry's No. 1 sales and cross-selling culture of Wells Fargo," he said in a statement.

During a call with analysts this month, Mr. Kovacevich singled out Wachovia Securities as one reason the merged firm could benefit from cross-selling synergies.

Some Wachovia Securities reps have resisted the firm's attempts to sell more mortgages and business loans. But others speak positively about their experiences referring clients to the Wachovia banking side.

"It will be interesting to see what happens," the West Coast Wachovia rep said.

E-mail Dan Jamieson at [email protected]

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