Great-West Lifeco Inc.’s U.S. subsidiary Empower Retirement has reached a definitive agreement to acquire Prudential Financial, Inc.’s full-service retirement business.
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Subject to regulatory approvals, Empower will acquire this business for a total transaction value of approximately C$4.45 billion (US$3.55 billion).
Empower will acquire Prudential’s full-service retirement business for a total transaction value of approximately C$4.45 billion (US$3.55 billion). The value includes approximately C$2.6 billion (US$2.1 billion) of capital to support the business. Lifeco expects to fund the transaction with approximately US$1.15 billion of limited recourse capital notes (“LRCNâ€), and US$1.0 billion of short-term debt, in addition to existing resources.
Run-rate annual expense synergies of US$180 million are expected to be phased in over 24 months. Revenue synergies of US$20 million are expected on a run-rate basis by the end of 2023 and are expected to grow to approximately US$50 million by 2025.
Prudential’s full-service retirement business is expected to contribute approximately US$325 million after-tax earnings to Empower on a run-rate basis by the end of 2023 (approximately US$245 million2 after financing costs and foregone investment income), with high cash generation.
EPS accretion of 8-9% is expected on a run-rate basis by the end of 2023.
Empower’s contribution to Great-West Lifeco’s earnings is expected to grow to 30% by the end of 2023, shifting the overall earnings profile with strong cash generation from this scalable business with high growth potential.
Empower expects to incur one-time integration costs of approximately US$170 million and deal costs of approximately US$55 million; integration is expected to be completed in 24 months. Subject to regulatory approvals, the transaction is expected to close in the first quarter of 2022.
Empower will acquire Prudential’s full-service retirement business with both a share purchase and a reinsurance transaction.
Great-West Life & Annuity Insurance Company will acquire the shares of Prudential Retirement Life and Annuity Insurance 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). ■