The consolidation trend in recordkeepers continues—and arguably accelerates—with the latest big industry acquisition.
Empower Retirement and Prudential Financial, Inc. have announced they have entered into a definitive agreement for Empower to acquire Prudential’s full-service retirement business. More specifically, at closing, Empower will acquire Prudential’s defined contribution, defined benefit, non-qualified and rollover IRA business in addition to its stable value and separate account investment products and platforms. It will expand Empower’s reach across retirement services market to more than 16.6 million individuals and $1.4 trillion in AUA.
Subject to regulatory approvals (the transaction is expected to close in the first quarter of 2022), Empower will acquire Prudential’s full-service retirement plan recordkeeping and administration business for a total transaction value of $3.55 billion. Notably, a press release points out that the business will be supported by $2.1 billion of capital through a combination of the balance sheet of the transferred business and Empower capital and surplus.
Prudential’s full-service retirement recordkeeping business comprises more than 4,300 workplace savings plans, through which approximately 4 million plan participants have saved $314 billion in assets—and includes more than 1,800 employees who provide a comprehensive suite of retirement recordkeeping and administration services to financial professionals, plan sponsors and participants.
“Empower and Prudential share a commitment to serving the financial needs of working Americans, their advisors and employers. This transaction will create an even stronger service organization at Empower, fueled by technology and the expertise of our deep talent pool,” said Ed Murphy, President and CEO, Empower. “We will continue to leverage our scale and resources to challenge the status quo and be uniquely positioned to serve the retirement and wealth management needs of millions of retirement savers in every phase of their financial journey.”
“Today’s announcement is a significant milestone in Prudential’s transformation and the execution of our strategy to become a higher growth, less market sensitive, more nimble business,” said Prudential Chairman and CEO Charles Lowrey. “In Empower, we have found a partner that, like Prudential, is passionate about expanding financial opportunity for more people, and that has the scale and expertise to ensure the long-term success of the full-service retirement business.”
The acquisition will allow Empower to expand services to the broadening spectrum of workplace savings plans it now serves, which includes mega, large, mid-size and small corporate 401(k) plans; government plans ranging in scale from state-level plans to municipal agencies; not-for-profit 403(b) plans; and collectively bargained Taft-Hartley plans.
The press release explains that Prudential will continue to participate in the institutional and individual retirement market, serving retirees, annuitants and employers through its Institutional Investment Products business, as well as through income and investments solutions provided by its Individual Annuities business and PGIM. That said, following the close of the transaction, Prudential’s Retirement business will consist of Pension Risk Transfer, International Reinsurance, Structured Settlements, and Institutional Stable Value wrap product lines.
Prudential expects to use the proceeds from the transaction for general corporate purposes. Prudential now expects to return $11.0 billion to shareholders through 2023, up from the $10.5 billion announced in May 2021, and intends to reduce financial leverage and enhance its financial flexibility.
Empower will acquire Prudential’s retirement services businesses with both a share purchase and a reinsurance transaction. Great-West Life & Annuity Insurance Company will acquire the shares of Prudential Retirement Insurance and Annuity Company and business written by The Prudential Insurance Company of America will be reinsured by Great-West Life & Annuity Insurance Company and Great-West Life & Annuity Insurance Company of New York (for New York business).
Eversheds Sutherland served as legal counsel and Goldman Sachs & Co. LLC and Rockefeller Capital Management served as financial advisors to Empower. Debevoise & Plimpton served as legal counsel and Lazard served as exclusive financial advisor to Prudential.
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