Empower Retirement and Prudential Financial, Inc., today announced that Empower will acquire Prudential’s retirement business in a multi-billion-dollar deal.
Subject to regulatory approvals, the two companies have entered into a definitive agreement for Denver-based Empower to acquire Newark-based Prudential’s full-service retirement plan recordkeeping and administration business for a total transaction value of $3.55 billion. 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. It also 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.”
The acquisition will add significant expertise, a broader set of capabilities and an expanded product portfolio to Empower’s existing business and drive additional scale to the benefit of retirement investors and employers who sponsor workplace savings plans.
Empower has created scale through a combination of multi-year organic sales growth and acquisitions, including the 2020 purchases of the MassMutual retirement plan business and digital-first RIA and wealth manager Personal Capital.
Deal raises Empower participant base past 16 million
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.
Empower expects the acquisition to benefit retirement plan participants by combining two client-focused businesses with deep retirement expertise on a single state-of-the-art technology platform. 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 401k plans; government plans ranging in scale from state-level plans to municipal agencies; not-for-profit 403b plans; and collectively bargained Taft-Hartley plans.
Leveraging new capabilities from its 2020 acquisition of Personal Capital, Empower will offer a highly personalized digital experience that can integrate the elements of any individual’s financial plan to help them better understand their current financial needs through financial advice and goal setting.
The transaction, which is expected to close in the first quarter of 2022 pending customary regulatory approvals, will increase Empower’s participant base from around 12 million to 16.6 million and its retirement services recordkeeping assets from $1 trillion to approximately $1.4 trillion administered in approximately 71,000 workplace savings plans.
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).
Prudential hits milestone in transformation
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, a top 10 global asset management firm.
“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.”
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.
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.
SEE ALSO:
- Empower Releases ‘Holistic Digital Financial Experience’ for Participants
- Empower Acquiring Personal Capital in Bid to Boost 401k Participant Financial Wellness
- Episode 17—Ed Murphy, President and CEO of Empower Retirement, on M&A, Work from Home and NFL Football
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
