In another move to expand its institutional asset management business, Wachovia Corp. said Wednesday that it would buy Metropolitan West Securities LLC, a third-party securities lending agent that also manages short-term fixed-income assets.
MetWest Securities has been Wachovia's securities lending agent for the past three years, according to Darryl J. Fluhme, the president of Wachovia's corporate and institutional trust division.
The partnership has been "extremely successful, and as a result of that success, we just made an inquiry, and that led to this acquisition," Mr. Fluhme said in an interview Wednesday. "We see this as an additional value-added service that we can offer our clients. This is just another arrow in our quiver."
The two companies did not say how much Wachovia is paying for MetWest, though Mr. Fluhme called the amount "insignificant" for the $389 billion-asset Wachovia. The acquisition is expected to be completed in January.
MetWest Securities is a subsidiary of Metropolitan West Financial Inc., a Los Angeles company whose vice chairman is former Vice President Al Gore. MetWest Financial was formed in 1992, when its founders acquired the securities lending operations of the old BankAmerica Corp.
Some of the employees of MetWest Securities, which has offices in Los Angeles and Short Hills, N.J., came aboard when it acquired the assets of Cantor Fitzgerald's securities lending business in December 2001.
Wachovia said it plans to keep MetWest's 68 employees and continue operating the firm under the MetWest name.
The deal is the latest in a string of nonbank acquisitions that Wachovia has announced since 2001, when First Union Corp. of Charlotte bought the old Wachovia, of Winston-Salem, N.C. In April of this year the asset management unit expanded its retirement outsourcing division by buying PFPC Retirement Services from PNC Financial Services Group Inc. of Pittsburgh.
Mr. Fluhme said acquiring MetWest would give Wachovia about $2 billion of new client assets from corporate and institutional investors, including some on the West Coast, where Wachovia's reach is limited.
More importantly, the deal would add securities lending and short-term, fixed-income asset management to Wachovia's services for corporate and institutional clients. MetWest had $50 billion of securities on loan to institutional investors as of Sept. 30.
"It's obviously not a large transaction in the scheme of things," said Jason Goldberg, an analyst at Lehman Brothers. "But they are picking up expertise in securities lending, which is a niche that is becoming increasingly important. As they broaden their product offerings, this acquisition should help."
