UPDATE 1-Prudential to sell brokerage stake to Wells Fargo

NEW YORK, June 17 (Reuters) - Prudential Financial Inc (PRU.N) said it plans to sell to Wells Fargo & Co (WFC.N) its 38 percent stake in the brokerage now known as Wells Fargo Advisors, a transaction it has estimated is worth $5 billion.

The big U.S. life insurer is trying to bolster its balance sheet after heavy investment losses. It expects the transaction to close by Jan. 1, 2010, according to a Wednesday filing with the U.S. Securities and Exchange Commission.

Prudential had obtained the 38 percent brokerage stake in July 2003 when it merged its own brokerage with that of the former Wachovia Corp, creating Wachovia Securities.

In 2007, when Wachovia bought the A.G. Edwards Inc brokerage, Prudential obtained an lookback option to sell its stake to Wachovia.

Wells Fargo inherited a 62 percent stake in the brokerage when it bought Wachovia at the end of 2008. Last month, it renamed the brokerage Wells Fargo Advisors.

Prudential had in December announced its intention to sell its minority stake. The lookback option allowed the Newark, New Jersey-based company to exercise the put, or sale, option based on the underlying asset's optimal value. (Reporting by Jonathan Spicer and Jonathan Stempel)