Mergers & Acquisitions

Principal to acquire Wells Fargo Institutional Retirement & Trust business

Definitive agreement includes Wells Fargo’s defined contribution, defined benefit, executive deferred compensation, employee stock ownership plans, institutional trust and custody and institutional asset advisory businesses

Doubles Principal U.S. retirement businessi; achieving greater scale and balance to compete, invest and grow.
A powerful combination for customers, employees and shareholders; will make Principal a Top 3 defined contribution recordkeeper.

April 09, 2019 — DES MOINES, Iowa–(BUSINESS WIRE)–Today, Principal Financial Group® (Nasdaq: PFG) announced a definitive agreement with Wells Fargo & Company (NYSE: WFC) to acquire its Institutional Retirement & Trust business. At closing, Principal® will assume ownership of Wells Fargo’s defined contribution, defined benefit, executive deferred compensation, employee stock ownership plans, institutional trust and custody and institutional asset advisory businesses and serve a combined 7.5 million U.S. retirement customersi.

“Retirement is at the heart of our business and core to our future,” said Dan Houston, chairman, president and CEO of Principal. “This will be a powerful combination for customers, employees and shareholders as we solidify our place as a top-three leader in the U.S. retirement market. The acquisition will bring expanded capabilities, reach and scale; fueling our ability to compete, invest and grow to help more people to achieve their retirement outcomes.”

A strong foothold in the mid-sized employer market

Through this acquisition, Principal will double the size of its U.S. retirement business by the number of total recordkeeping assetsi, while bringing on attractive institutional trust and custody offerings for the non-retirement market. In addition to increased scale, Principal will gain a strong foothold with mid-sized employers as more than two-thirds of Wells Fargo’s institutional retirement assets are in plans ranging from $10 million to $1 billionii. Principal expects to be well-positioned to deliver a broader set of solutions and capabilities to its customers, strengthen investments in digital technologies and automation, and recognize materially significant synergies and efficiencies.

“We are deeply committed to helping people have enough, save enough and protect enough in retirement,” said Renee Schaaf, president of Retirement and Income Solutions at Principal. “Together with the Wells Fargo Institutional Retirement & Trust business, our customers can expect a continued focus on delivering differentiated investment, income and financial wellness solutions that empower them to reach their retirement goals.”

As of December 31, 2018, the respective Wells Fargo retirement businesses had $827 billion in assets under administrationiii served by approximately 2,500 employees in locations across the U.S., Philippines and India. There are four major employee centers in: Charlotte, N.C.; Minneapolis/Roseville, Minn.; Waco, Texas; and Manila, Philippines.

This will be a powerful combination for customers, employees and shareholders as we solidify our place as a top-three leader in the U.S. retirement market...

Visit www.principal.com/BetterRetirement for more information about the Principal acquisition of Wells Fargo’s Institutional Retirement & Trust business.

Transaction details

Under the agreement, the purchase price is $1.2 billion. The agreement also includes an earnout of up to $150 million tied to better than expected revenue retention, payable two years post-closing.

The acquisition is expected to be accretive to net income and non-GAAP operating earnings per diluted share in 2020iv and will be financed with cash and senior debt financing.

The transaction between Principal and Wells Fargo will be reviewed by U.S. regulatory authorities prior to closing, which is anticipated in third quarter of 2019.

Lazard acted as the financial advisor on the transaction to Principal. Debevoise & Plimpton LLP acted as legal counsel to Principal on the acquisition.

Conference call

On Tuesday, April 9, 2019, at 9 a.m. ET, Dan Houston, chairman, president and chief executive officer, discussed the company’s planned acquisition during a live conference call. Other members of senior management were available for a question and answer session. A slide presentation to accompany the call is available on our website at www.principal.com/investor.

  • An audio replay will be available approximately two hours after the live earnings call via:
  • Online at principal.com/investor
  • Telephone:
    855-859-2056 (U.S. and Canadian callers)
    404-537-3406 (International callers)
    Access code: 2085676
    The replay will be available until April 15, 2019

 

 

 

 

i Pro-Forma calculations based upon data as of December 31, 2017 provided by PLANSPONSOR 2018 Recordkeeping Survey and inclusive of shock lapse and new sales assumptions.
ii Source: Wells Fargo; Data as of 6/30/2018
iii Source: Wells Fargo; Data as of 12/31/18
iv Excludes cost of the transaction and integration of the Wells Fargo Institutional & Retirement Trust business and earnout liability accounting
About Principal®
Principal helps people and companies around the world build, protect and advance their financial well-being through retirement, insurance and asset management solutions that fit their lives. Our employees are passionate about helping clients of all income and portfolio sizes achieve their goals – offering innovative ideas, investment expertise and real-life solutions to make financial progress possible. To find out more, visit us at principal.com.