Wells Fargo stock offering to raise $12.25B

NEW YORK (AP) -- Wells Fargo & Co. said Tuesday that a stock offering planned for later this week should raise $12.25 billion that will be used to help repay its government bailout loan.

The offering price of $25 a share was announced a day after Wells Fargo said it would repay the $25 billion it received as part of the Troubled Asset Relief Program.

The stock sale is expected to close on Friday, Wells Fargo said. It will raise $10.65 billion from selling 426 million shares of common stock, and another $1.6 billion from selling another 63.9 million shares to underwriters, bringing the total offering to 489.9 million shares.

The bank's shares outstanding will increase by about 10.4 percent from 4.69 billion shares of common stock outstanding as of Oct. 30. Wells Fargo's shares rose 17 cents to close at $25.66 on Tuesday.

"We are very pleased with the positive reception for this equity offering, and we appreciate the confidence investors have demonstrated in Wells Fargo's strength and future prospects," Chief Financial Officer Howard Atkins said in a prepared statement.

Wells Fargo was the last of the initial eight big banks that received TARP money to announce it would repay the government. The San Francisco-based bank's announcement on Monday came just hours after Citigroup Inc. said it would repay $20 billion in TARP money and the government would sell its nearly 34-percent stake in the bank.

By repaying TARP, Wells Fargo escapes restrictions like caps on executive compensation and dividends. It will also save the bank $1.25 billion annually in interest payments it had to pay the government for the money.

Aside from the stock sale, Wells Fargo also is issuing $1.35 billion in stock to employees instead of giving them cash bonuses. The TARP compensation restrictions affected the size of cash salary and bonuses banks could award their executives.

The size of the stock offering means Wells Fargo will no longer need to raise $1.5 billion through asset sales by the end of 2010, the bank said.

Separately Tuesday, Wells Fargo said it will pay $4.5 billion in cash for Prudential Financial Inc.'s stake in the companies' retail brokerage joint venture, which includes Wells Fargo Advisors LLC. Wells Fargo will buy the noncontrolling stake by Dec. 31.

"Wells Fargo considered the cost of Prudential's put in the assumptions for the Wachovia merger and we are pleased to take this next step pursuant to the agreement between Wachovia and Prudential," Wells Fargo Chief Financial Officer Howard Atkins said. Wells Fargo purchased Wachovia Corp. at the height of the financial market crisis last year.

Prudential Chairman and CEO John Strangfeld said in a statement that the deal will substantially enhance the company's capital position and financial flexibility going forward.

The purchase price is based on the value of Wells Fargo Advisors (then known as Wachovia Securities) at Jan. 1, 2008, prior to the contribution of the retail securities businesses of A.G. Edwards & Sons. Wells Fargo was advised by Greenhill & Co. LLC and Prudential was advised by Barclays Capital Inc. in determining the valuation.

Cobalt International Energy IPO prices below range

DENVER (AP) -- Cobalt International Energy Inc. hoped investors would contribute more than $1 billion to its search for oil miles beneath the ocean even though it has no proven reserves and it expects no revenue for at least another two years.

But the Houston-based company fell short of its goal Tuesday evening, raising $850.5 million in its initial public offering as it priced 63 million shares at $13.50 each -- below the $15 to $17 range it had expected. Proceeds could reach $978.1 million if the offering's underwriters exercise an option to buy 9.45 million more shares.

Cobalt is a risky bet, say analysts who research IPOs.

Founded in 2005 by a group of private equity investors and longtime oil industry executives, including Chairman and CEO Joseph H. Bryant, whose resume includes stints at Unocal Corp., BP and Amoco, Cobalt has posted losses throughout its history and no one really knows where volatile oil prices will be in three years.

When the company strikes oil, it will take Cobalt additional time to get a well in production, analysts said.

"IPO buyers are looking for financials that are tangible, a revenue stream that's visible and profits. They're not looking for concepts right now," said Scott Sweet, senior managing partner of IPOBoutique in Tampa, Fla., comparing Cobalt to an early-stage biotech firm that still needs to go through four phases of testing to get federal approval.

In 2008, the company had a loss of $71.6 million, compared with a loss of $108.9 million the previous year. The company has lost $322.1 million since its inception.

It is unusual for an oil and gas company to go to the public markets without reserves in place or production under way, said research analyst Nick Einhorn of Renaissance Capital based in Greenwich, Conn.

"There's a lot of risks but I think for an investor who kind of believes in this deepwater opportunity, it is a good way to get 100 percent exposure to that," he said.

Cobalt has developed a proprietary method for exploration that involves analyzing geophysical information, including seismic data. It has purchased leases in the Gulf of Mexico, and off the coast of Angola and Gabon, regions where many major oil companies operate.

It has invested about $1 billion and expects to spend $1.4 billion over the next two years on exploration, Einhorn said.

Cobalt is reaching out to the public markets as the oil industry is recovering from the recession. Oil prices have hovered in the $70 range since early October, up from a low of $32.70 per barrel in January. But supplies have remained high and demand has diminished.

The company aims to raise money to finance drilling and exploration through 2011, capital spending and for general corporate purposes.

Cobalt shares will begin trading under the symbol "CIE" on the New York Stock Exchange on Wednesday.