UPDATE 2-Prudential to keep Wachovia joint venture for now

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NEW YORK, July 6 (Reuters) - Prudential Financial Inc. (PRU.N), the second-largest U.S. life insurer, said in a filing on Friday that it will keep a stake in a joint brokerage venture with Wachovia Corp. WB.N

Wachovia said in May that it would buy regional broker A.G. Edwards Inc. AGE.N for $6.8 billion, creating the second-largest U.S. retail broker. The move required Prudential, which now owns a 38 percent stake in the venture, to make a decision.

Newark, New Jersey-based Prudential said it would exercise its "lookback" option, which allows it to delay a decision for up to two years following the combination. It can then add additional capital, sell its stake back to Wachovia or accept a reduced stake in the venture.

If Prudential decides to keep its stake at 38 percent it will then have to make a capital contribution to the joint venture, according to Prudential's filing with the Securities and Exchange Commission.

It can also "put" or sell its part of the venture to Wachovia at any time after July 1, 2008, based on the appraised price of the joint venture, it said.

During the two-year time period, Prudential's share of the joint venture, formed four years ago, will be based on its diluted ownership level.

Prudential said last month that it would shut its stock research and trading business because it lacked the scale and the competitiveness need by the market.

The joint venture with Wachovia has been profitable for Prudential. Analysts have said that if Prudential chooses to sell its stake to Wachovia, it could make a profit of $2.5 billion to $3 billion after taxes, or twice the worth of its stake back in 2003.