Wachovia Corp. said Tuesday that it would buy brokerage Interstate/Johnson Lane Inc. for $230 million in stock.

The transaction, announced after the close of trading, will be accounted for as a purchase and is scheduled to close in the first half of next year, Wachovia said.

The acquisition would add 457 retail brokers to the Winston-Salem, N.C., banking company. Wachovia has set up a $23 million pool to retain key Interstate employees.

Speculation on the deal had been driving up Interstate's stock for several days. Shares of the Charlotte, N.C.-based firm rose 8% on the day before the deal was announced and had risen 77% since Oct. 8.

The deal appears to be relatively inexpensive for Wachovia, which set up a section 20 securities affiliate, Wachovia Capital Markets Inc., in June. The banking company said it would pay 2.2 times book value for Interstate and 15.3 times last year's earnings.

Interstate ranked 86th in capital according to the Securities Industry Association, and many firms of that size have elected to sell to commercial banks in the past year. Most recently Scott & Stringfellow Financial Corp. agreed to sell itself to BB&T Corp.

Talks with Wachovia began "six or seven weeks ago," said James H. Morgan, chairman of Interstate/Johnson Lane. "We saw the changing landscape in the financial services business and decided this was the time to find a partner who could enhance our future."

"Many of our customers do business with Interstate/Johnson Lane," said Wachovia CEO L.M. Baker Jr. "There is a strong geographic and cultural fit here."

Michael A. Flanagan, an independent securities industry analyst, said Interstate "has a very strong institutional fixed-income business" but "is still embryonic in its corporate finance capabilities."

The additional capital Wachovia can provide, plus a longer list of clients, "sets the stage for potentially a very good combination," he said.

Securities Data Co. said Interstate ranks 53d in debt and equity underwriting this year, managing $349 million worth of deals.

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