Empower Retirement, the U.S. subsidiary of Great-West Lifeco Inc., is purchasing Prudential Financial Inc.’s full-service retirement business for $4.45 billion in a bid to deepen its presence in the U.S. market.
The deal made by the Winnipeg-based company includes about $2.6 billion of capital to support the business and will reinforce its position in the American retirement market, according to a press release.
Paul Mahon, Great-West’s president and chief executive officer, says Empower was keen to acquire Newark, N.J.-based Prudential because Great-West sees the U.S. as key to dominating the retirement business. “When we look to the U.S. retirement market, we view it as the largest retirement market in the world. It features a high degree of benefits from having scale, automation and digitization, so as we looked to the Empower business, we saw significant opportunity for growth.”
After the deal is complete, the company predicts Empower’s contribution to its overall earnings will grow to 30 per cent by the end of 2023. The transaction, which is subject to regulatory approvals, is expected to close in the first quarter of 2022.
The deal’s announcement comes as Great-West and Empower have been seeking similar opportunities and synergies throughout the coronavirus pandemic. In September 2020, Empower reached an agreement to acquire the retirement services business of Massachusetts Mutual Life Insurance Co. In a press release, the company said the $4.4-billion transaction would expand Empower’s reach to more than 12.2 million retirement plan participants and assets to US$834 billion.
Prudential’s retirement business covers 4,300 workplace savings plans with about four million participants and US$314 billion in assets under administration. The addition increases Empower’s base to more than 16.6 million participants, 71,000 workplace savings plans and about US$1.4 trillion in assets under administration, noted the release.
Mahon envisions moving Prudential and Massachusetts Mutual’s customers over to Empower’s platform. These customers will also be able to access offerings being embedded in Empower programs from wealth management business Personal Capital, which it bought last June for an upfront consideration of US$825 million and deferred consideration of up to US$175 million subject to achievement of target growth objective.