NEW YORK, May 31 (Reuters) - U.S. bank Wachovia Corp. WB.N on Thursday said it would buy A.G. Edwards Inc. AGE.N for about $6.8 billion in cash and stock to create the second-largest retail brokerage in the United States. The deal calls for the exchange of 0.9844 shares of Wachovia common stock and $35.80 in cash for each A.G. Edwards share.
The deal represents a 16 percent premium to A.G. Edwards’ closing share price on Wednesday.
The combined retail brokerage will be based in St. Louis, home of A.G. Edwards, and will operate as Wachovia Securities.
Wachovia Securities President and Chief Executive Daniel Ludeman will keep that role in the combined brokerage firm. A.G. Edwards Chairman and CEO Robert Bagby will be chairman.
The combined organization should achieve expense efficiencies of $395 million after taxes by 2009, or 10 percent of its most recent fiscal year-end expense base, Wachovia said.
Wachovia expects to record merger-related and restructuring charges and exit cost purchase accounting adjustments of about $860 million after taxes in connection with the deal.
The company said it expected the transaction to add to earnings and provide an internal rate of return of 24 percent.
Prudential Financial, Inc. (PRU.N) owns 38 percent of Wachovia Securities.
((Reporting by Michael Flaherty, editing by Lisa Von Ahn; firstname.lastname@example.org; +1 646-223-6152))
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