Wachovia to buy A.G. Edwards for $6.8 billion

Wachovia Corp.  and A.G. Edwards Inc. announced today an agreement under which Wachovia will acquire A.G. Edwards, which will be combined with Wachovia Securities, LLC, to create an industry-leading retail brokerage firm with $1.1 trillion in client assets and nearly 15,000 financial advisors. The combined firm will have an enhanced share of the U.S. brokerage market with significantly increased penetration in 48 of the 50 largest metropolitan statistical areas.

The combined full-service firm will have a national footprint of 3,350 brokerage locations, including 1,500 dedicated retail offices in all 50 states and the District of Columbia. The combined organization will offer objective advice to clients based on research from multiple providers, provide industry-leading customer service using an open architecture platform, and have access to a broad suite of financial products and services.

"The long-term growth opportunities of the brokerage industry are extremely compelling to Wachovia, and we have long expressed our interest in growing this business both organically and through acquisition," said Ken Thompson, Wachovia chairman and CEO. "This combination with A.G. Edwards, which is widely considered one of the most highly regarded remaining independent brokerage firms in the industry, will further enhance our scale and relevance."

The combined retail brokerage organization will be headquartered in St. Louis, Missouri. Other A.G. Edwards businesses including research, underwriting and investment banking, mutual funds and trust will be consolidated into the appropriate Wachovia lines of business. The combined firm will operate as Wachovia Securities. The merger is expected to be completed in the fourth quarter of 2007 and integration is expected to be completed by the end of the first quarter of 2009.

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Daniel J. Ludeman, a 27-year veteran of the brokerage industry, is currently president and CEO of Wachovia Securities and will be the president and CEO of the combined brokerage firm. Robert L. Bagby, who has been chairman and CEO of A.G. Edwards since 2001, will serve as chairman of the combined brokerage firm. He joined A.G. Edwards in 1975.

"This combination will bring together two similar companies determined to preserve and enhance a corporate culture that is focused on attracting the nation’s best financial advisors, respecting client relationships, providing unbiased advice and delivering excellent client service," said Bagby. "In assessing potential merger partners, we looked carefully for an organization that would offer A.G. Edwards the scale and enriched product suite required to fuel continued growth, while preserving the characteristics and culture that have made our organization so successful. In Wachovia Securities, we believe we found the perfect partner."

Wachovia Securities reports to David Carroll, president of Wachovia Corporation’s Capital Management Group. As consolidation continues in the brokerage industry, the opportunity to combine with a premier firm like A.G. Edwards was "a rare chance to solidify our leadership in the industry with the scope and resources required to be the firm of choice for clients and for quality financial advisors," Carroll said. "Our focus on providing our advisors and consultants with best-in-class tools, products and support to meet their clients’ needs will help us continue to enhance the productivity and efficiency of our combined firm."

Carroll noted that Wachovia is known for its success and expertise in integrations, including six brokerage firms since 1998, of which the joint venture with Prudential Securities was the largest.

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John Strangfeld, vice chairman of Prudential Financial, Inc. [NYSE:PRU], which currently owns 38 percent of Wachovia Securities, said, "We are very pleased with our investment in Wachovia Securities and our partnership with Wachovia management. We believe the combination of A.G. Edwards and Wachovia Securities is highly attractive and takes the business to a new level of prominence and promise. We have complete confidence in management’s ability to make this deal successful."

Under the terms of the agreement, A.G. Edwards’ shareholders will receive 0.9844 shares of Wachovia common stock and $35.80 in cash for each of their A.G. Edwards common shares. Based on Wachovia’s share price at the close of business on May 30, 2007, the transaction would be valued at $89.50 per A.G. Edwards share.

The combined organization is expected to benefit from significant annual expense efficiencies, estimated at $395 million after tax by 2009. These efficiencies represent 10 percent of the combined firm’s most recent fiscal year-end expense base. Wachovia is expected to record merger-related and restructuring charges and exit cost purchase accounting adjustments of approximately $860 million after tax in connection with the transaction over the 18-month integration period.

The transaction is anticipated to be accretive to Wachovia’s earnings per share excluding merger-related and restructuring expense and intangibles amortization in the first full year following the closing, not including the effect of one-time charges. The transaction also provides an internal rate of return of 24 percent, far exceeding Wachovia’s cost of capital. Completion of the merger is subject to A.G. Edwards’ shareholder approval and normal regulatory approvals.

Credit Suisse Securities (USA) LLC, Wachovia Securities and Simpson Thacher & Bartlett LLP represented Wachovia, and Goldman, Sachs & Co. and Wachtell, Lipton, Rosen & Katz represented A.G. Edwards.