Wells Fargo (WFC) aims to branch into prime brokerage with an agreement to buy Merlin Securities, which serves hedge funds, family offices and other clients with up to $2 billion of assets, Wells announced Friday.

Terms of the deal for New York-based Merlin were not disclosed.

Merlin has 100 employees and offers custody, clearing, trading and other services to more than 500 hedge funds, according to its website.

It would be folded into Wells Fargo Securities, the successor to the investment bank Wells acquired in its takeover of Wachovia Corp. in 2008. Wells, based in San Francisco, has made bulking up that division's trading and hedge fund services a priority.

Wells has not made a bank acquisition in more than three years, but in the past year it has made deals for specialty lenders, insurance firms and other niche players. For example, Wells in September agreed to buy hedge fund administration services provider LaCrosse Global Fund Services.

Merlin is "a logical extension our offering to the investment industry" and "provides new cross-sale opportunities," John Shrewsberry, head of Wells Fargo Securities, said in a press release Friday.

The deal is scheduled to close in the third quarter pending regulatory approval. Greenhill & Co. advised Merlin and Wells Fargo Securities advised its parent company.

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