Prudential, Shearson Talks on Back-Office Merger Stall

Talks between Prudential Securities Inc. and Shearson Lehman Bros. on merging their “back-office” data processing operations have broken down, Wall Street sources said Friday.

They said the talks appeared to reach an impasse on the issue of the degree of joint control over the facilities. Both firms declined comment.

The talks, begun last December and aimed at reducing costs amid Wall Street’s slowdown, lost steam after George Ball resigned last week as Prudential’s chairman, one source said. Ball had led the Prudential effort to link its transaction processing operations with those of Shearson.

Securities industry executives and analysts have said that while Wall Street firms are likely to seek cost savings in such mergers, they are difficult to accomplish because of technical hurdles and concerns over control and protection of company secrets.

The Jan. 24 disclosure by Shearson parent American Express that its Information Services Corp. unit would take control of the back office facilities was viewed by Prudential officials as undermining the principle that the operation would be a joint venture, the sources said.

Some Shearson executives appeared startled that Prudential had withdrawn from the talks so abruptly, noting that they had begun discussing detailed technical issues.