SAN FRANCISCO - Wells Fargo & Co. and Nikko Securities Co. Ltd. said Wednesday that they agreed to sell their joint money management venture to Barclays PLC of London.
The firm, Wells Fargo Nikko Investment Advisors, has $171 billion under management and is one of the largest in the area of index funds, which tie their performance to stock and bond market indexes.
Wells Fargo and its Japanese partner are to split a cash payment from Barclays of $440 million. For that price, Barclays will also be getting a Wells Fargo division called MasterWorks, with $6.6 billion of 401(k) plan assets under management and administration.
Also as a result of the deal, Nikko Securities and Barclays will jointly operate a money management unit in Japan. Wells said it expects to post a $100 million after-tax profit when the deal closes, probably in the fourth quarter, pending regulatory approvals.
The sales will basically take Wells Fargo out of the institutional money management business.
This would mark an abrupt end to a heady five years in which Wells, by partnering with Nikko, had vaulted into the top ranks of institutional money managers. According to Pensions & Investments magazine, Wells Fargo Nikko is the world's biggest manager of tax-free assets and the fifth- largest manager of all types of money.
The company was formed in 1990 when Nikko Securities, a leading Japanese brokerage company, paid $125 million to buy half of Wells Fargo's Investment Advisors money management unit.
Observers said the selloff makes sense because it will give the Wells- Nikko operation the global presence that it needed but was unable to build on its own. Barclays has operations in more than 70 countries.
"Barclays is one of the foremost providers of financial services in the world and we cannot think of a better fit for (Wells Fargo Nikko Investment Advisors) and its clients," said Wells chairman Paul Hazen.
The deal is the latest in a string of steps by Wells to shrink its business operations. Earlier this year, the San Francisco-based bank announced plans to get out of the first mortgage business.
Stock analysts said they expect Wells to continue exiting business lines in which it does not believe it can generate an acceptable return, and to continue buying back stock, until it finds other ways to deploy its capital.
Barclays plans to merge Wells Fargo Nikko into its BZW Asset Management unit, which, among other things, manages $32 billion. Most of this money is from the United Kingdom, while Wells Fargo Nikko's money mainly comes from the United States.
Lindsay Tomlinson, chief executive of BZW Asset Management in London, said the two operations "dovetail quite nicely." This means that few if any staff cuts are expected among the more than 500 employees of Wells Fargo Nikko.
Fred Grauer, chairman of Wells Fargo Nikko, will become the head of the quantitative arm of BZW Asset Management, reporting to Mr. Tomlinson.
When the deal is completed, Mr. Jacobs said that Wells Fargo will be left as a manager of more than $30 billion of assets, nearly all of it from individual investors.
Barclays won the right to buy Wells Fargo Nikko in competitive bidding that began in April.
Other companies that expressed an interest included Merrill Lynch & Co. and State Street Boston Corp. Mr. Tomlinson said the deal will not be dilutive to Barclay's earnings.