Empower Retirement to Buy Personal Capital
29 Giugno 2020 - 7:12PM
Dow Jones News
By Dave Sebastian
Empower Retirement said it is buying the personal-wealth
management company Personal Capital Corp. for as much as $1
billion, in a move to expand Empower's financial-planning tools to
individuals.
Empower, the second-largest retirement-plan recordkeeper in the
U.S., said Monday it would pay $825 million to acquire Personal
Capital. The deal also includes up to $175 million over two years,
subject to achieving certain milestones. The Denver-based company
is a subsidiary of Great-West Lifeco Inc.
Great-West Lifeco's sister company IGM Financial Inc. owns a
24.8% stake in Personal Capital, having invested $144.8 million in
the startup since 2016. On Monday, IGM said it expects proceeds of
$176.6 million from the deal with an additional $24.6 million
expected from the earn out. IGM had valued its stake at $145.3
million, it said. Great-West Lifeco and IGM are both majority-owned
by a unit of Power Corp. of Canada.
Empower said it aims to grow in retail advice and wealth
management through the transaction. The company expects the
acquisition to help it increase defined-contribution sales, managed
accounts usage rates, participant engagement and the adoption of
more services.
Empower said as of June 28 it had $656 billion in assets under
management, while Personal Capital had $12.5 billion. Empower
provides retirement plan services to more than 40,000
organizations, while Personal Capital has more than 2.5 million
users accessing its free financial tools.
Personal Capital's gross revenue and assets under management
grew about 60% from 2015 to 2019, Empower said.
Empower expects one-time integration expenses of $57 million
over 17 months, as well as transaction expenses of $28 million. The
company expects the deal to close in the second half of 2020.
Empower expects Personal Capital to add to its profits starting
in 2023, following investments in customer-acquisition strategy in
2021 and 2022.
Empower and Great-West Lifeco executives said on an investor
call that Personal Capital was able to weather the market
volatility caused by the Covid-19 pandemic, with client retention
rates equal to what they were prior to the health crisis.
"The Covid-19 crisis has been a bit of a test case for
consumers' willingness" to engage with financial advisers digitally
amid physical-distancing measures, said Paul Mahon, president and
chief executive of Great-West Lifeco.
Write to Dave Sebastian at dave.sebastian@wsj.com
(END) Dow Jones Newswires
June 29, 2020 12:57 ET (16:57 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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