Ball Resigns as Chairman, CEO of Pru-Bache : Management: The departure is believed to be related to a series of problems at the brokerage, capped by its projected $250-million loss in 1990.
As the Wall Street brokerage Prudential-Bache Securities Inc. struggles to overcome enormous losses, its longtime chairman and chief executive, George L. Ball, said Wednesday that he has resigned.
Prudential Insurance Co., which owns Prudential-Bache, said the parent company’s chairman emeritus, Robert A. Beck, 65, was named acting chief executive of the brokerage. A spokesman for Prudential Insurance said Beck will serve while a search is made for a permanent successor to Ball, 52. He said the company doesn’t yet have a “short list” of candidates.
Ball’s departure had been rumored for some time, particularly after the brokerage in December predicted a bigger-than-expected loss for 1990 of $250 million, one of the largest for a Wall Street firm. Joe Vecchione, a spokesman for Prudential Insurance, insisted that Ball “was not asked to resign.”
However, in a written statement, Robert C. Winters, chairman and chief executive of Prudential Insurance, said: “For both George and me this is a step we regret, but we have both concluded that the recent history of Prudential-Bache makes it desirable to change the leadership of the organization.”
Ball failed to return several phone calls to his office Wednesday. Prudential Insurance declined to comment on what he will do, although it said he is expected to stay on temporarily to help Beck during a transition period. Ball had been head of Prudential-Bache since 1982.
Ball’s resignation also renewed speculation that Prudential Insurance might try to sell the brokerage. But Vecchione said “the company is not for sale.” In a letter to Prudential-Bache employees, Robert C. Winters, chairman of Prudential Insurance, sought to reassure the brokerage’s employees and said: “I believe Prudential-Bache has a strong future as part of the Prudential family.”
The parent has poured about $1.2 billion in capital into Prudential-Bache since buying it in 1981 but never received significant profits from the investment. Including 1990, the firm has lost money in three of the past four years, although it was profitable last month, and officials said they are cautiously optimistic that it will show a profit for 1991.
Prudential Insurance’s hopes of integrating with Prudential-Bache to create a “financial supermarket” never materialized. And Ball failed in an attempt to expand beyond Prudential-Bache’s core business as a retail brokerage to become a significant force in investment banking.
Late last year, the firm disclosed that once again it would focus mainly on its retail business. It has since laid off well more than half of its investment bankers. The firm also abandoned risk arbitrage, or speculation in takeover stocks, for its own account. In a further move to help out the ailing brokerage, Prudential Insurance last year took over about $600 million of leveraged buyout investments and other risky assets.
Despite the company’s denial that Prudential-Bache might be sold, Perrin Long, a securities industry analyst with Lipper Analytical Services Corp., predicted that Prudential Insurance will try to nurse the brokerage back to profitability and then try to sell it once the securities industry as a whole begins to show signs of recovery. The brokerage and investment banking industry has been in a deep slump since the October, 1987, market crash.
“Prudential Insurance would like to sell the whole thing if they can get it profitable and recoup most or all of the $1.2 billion they’ve sunk into it since they bought it,” Long said.
Beck retired as chairman of Prudential Insurance in 1987. His background is entirely in the insurance industry. But Winters noted in his statement that “Beck built a very strong sales organization at the Prudential,” adding that “he understands the financial services marketplace as well as any.” Arthur H. Burton Jr., 57, Prudential Insurance’s vice chairman, was named to serve as acting president of Prudential-Bache.
Prudential-Bache Profits & Losses Yearly earnings for Prudential-Bache Securities Inc. since 1982, when George L. Ball took over the firm. 1982: $30.2 ‘83: $7.5 ‘84: $85 ‘85: $43 ‘86: 81.7 ‘87: $135 ‘88: $111 ‘89: $51 ‘90*: $250 *projected Source: Associated Press
