Wells Buys Prime Brokerage, Seeks Hedge Fund Cash

NEW YORK — Wells Fargo will look more like its Wall Street counterparts after a deal announced Friday to buy Merlin Securities, a prime brokerage and technology provider based in San Francisco and New York.

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The deal marks Wells' second acquisition in its effort to establish itself in the prime brokerage field, a lucrative business for other U.S. banks of comparable size. Prime brokerage involves clearing big trades and providing other services mostly for hedge funds. Wells announced the acquisition of LaCrosse Global Fund Services, a hedge fund administration and service provider, in September.

The terms of the Merlin acquisition were not disclosed. Merlin will be acquired by Wells Fargo Securities, the bank's capital markets and investment banking division, which is based in New York.

Merlin's technology employs an open architecture, allowing clients to choose the custodian and trading platform that is right for their business, Wells said.

The deal extends Wells' offerings for the investment industry, which is increasingly focused on risk management and capital efficiency, said John Shrewsberry, head of Wells Fargo Securities. The combination will increase the range of products available to existing clients of both companies, he said.

Wells last month was the fourth-biggest U.S. bank by asset size, according to regulatory data.

The bank's San Francisco headquarters has long symbolized its distance from the business practices of Wall Street investment banks. Goldman Sachs and Morgan Stanley serve big-money clients and make much of their income in the capital markets.

Unlike diversified megabanks JPMorgan Chase & Co. and Citigroup, Wells never set up a big trading operation to complement its retail bank.

Among the top eight banks by asset size, the only other one based outside of New York is Bank of America, headquartered in Charlotte, N.C.

Wells expects to close on the Merlin acquisition during the third quarter of 2012. Under deal, Merlin's staff will join Wells Fargo Securities. The agreement is subject to regulatory approval and other customary closing conditions.

Wells Fargo & Co. shares edged up 3 cents to $33.87 in afternoon trading.