The race to acquire Wells Fargo Nikko Investment Advisors is heating up.

Merrill Lynch & Co. and Barclays de Zoete Wedd Investment Management are in discussions with the $170 billion-asset money management firm, according to well-placed sources.

The companies join State Street Boston Corp. as the leading contenders to take over Wells Fargo Nikko, a joint venture of Wells Fargo & Co. and Nikko Securities.

State Street emerged as a prospective bidder four weeks ago, shortly after Wells Fargo Nikko was placed on the block. It reportedly was preparing to offer $400 million to $500 million for the money manager, which specializes in index funds.

With the arrival of additional suitors, "the price is going to get bid up," said Oscar Junquera, a managing director of PaineWebber Inc.

Merrill Lynch is the latest on the scene, having held intensive meetings with senior managers of Wells Fargo Nikko last week, according to industry sources.

Executives of State Street and Barclays de Zoete Wedd participated in similar meetings last month. Barclays, a unit of Barclays Bank PLC, retained the services of Coopers & Lybrand, a consulting and auditing firm.

A spokeswoman for Wells Fargo Nikko said she could not, as a matter of policy, comment on any negotiations. Spokesmen for Merrill Lynch, Barclays, and State Street also declined to comment.

Wells Fargo Nikko has said it is seeking a new buyer because it wants to grow faster and expand internationally. The company has only $22 billion invested outside the United States, mostly in Japan.

Any one of the three potential buyers could certainly add an international presence. Merrill Lynch, Barclays, and State Street all have extensive global operations.

Merrill Lynch, which manages $164 billion of assets, is said to be drawn to Wells Fargo Nikko because it wants to boost its defined-contribution- plan and indexed-fund assets. Barclays, which manages $52 billion, would gain a stronger foothold in the U.S.

Despite the arrival of these new suitors, however, some observers say State Street, which manages $180 billion, offers the best fit for Wells Fargo Nikko.

In addition to having what some experts said was the biggest international presence of the companies, State Street is also a leader in index funds. The company manages $57 billion of these funds, which mirror the performance of broad market indexes like the S&P 500.

State Street is a powerhouse in global and domestic custody as well. That puts the company in a position to provide Wells Fargo Nikko's clients with securities safekeeping at extremely low cost. But there's also a downside: By stepping up its presence as a money manager, State Street could find itself in the uncomfortable position of competing with some of its own clients.

Some observers say there could be a culture clash between the entrepreneurial, Silicon Valley personality of Wells Fargo Nikko and the more buttoned-down approach of State Street.

One consultant said that of the three companies, State Street appears to have the largest overlap in operations with Wells Fargo. This means that if State Street buys the company, it could trigger more staff reductions than an acquisition by one of the others.

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