Principal Global Investors, LLC, the investment arm of Principal Financial Group (PFG) agreed to acquire majority stake in Finisterre Capital LLP, and Finisterre Holdings Limited. Principal will acquire a 51% stake by making an initial payment of $ 85 million. The transaction is expected to close in the third quarter, subject to regulatory approval.
Based in London, Finisterre Capital is an emerging markets fixed income specialist delivering risk-controlled, total return investment strategies to the institutional marketplace.
Principal expects the acquisition to be neutral to 2011 earnings per share but accretive to 2012 earnings per share. The Zacks Consensus Estimate for first-quarter 2011 is 70 cents per share. For full years 2011 and 2012, the Zacks Consensus Estimates are respectively, $ 2.97 per share and $ 3.39 per share.
The acquisition will help Principal to add to its emerging market investment capabilities through the launch of new emerging market products and strategies on a wider platform. Finisterre Capital will have access to Principal’s international exposure and strong distribution network and also capitalize on Principal’s product development expertise and support infrastructure.
The acquisition of Finisterre Capital is in sync with management’s intention to strategically deploy $ 700 million of capital over a period of 1 year for appropriate merger and acquisition opportunities.
Finisterre Capital has approximately $ 1.63 billion in assets under management across three funds — Global Opportunity Fund, Sovereign Debt Fund and Credit Fund. The five partners — Frode Foss-Skiftesvik, Paul Crean, Rafaël Biosse Duplan, Xavier Corin-Mick and Yan Swiderski will retain a significant minority stake. They will also continue to manage the day-to-day operations and will retain authority over fund investment decisions.
Recently, Principal Financial Group, S.A. de C.V., has agreed to acquire HSBC AFORE, S.A. de C.V. (HAFO) from Grupo Financiero HSBC, S.A. de C.V. for $ 198 million. The acquisition enhances Principal’s presence in Mexico.
Principal’s strong franchise within the pension sector, aided by its diversification in both products and geography, positions it to benefit from the gradual recovery of the credit market. Decent capital levels and cost containment measures also augur well, though higher delinquencies in its commercial mortgage portfolio remain a matter of concern.
We maintain our Neutral recommendation on Principal Financial. The quantitative Zacks #2 Rank (short-term Buy rating) for the company indicates upward pressure on the shares over the near term.
Based in Des Moines, Iowa, Principal Financial Group Inc. provides an expansive range of retirement savings, investment and insurance products and services through its various subsidiaries. It competes with Lincoln National Corporation (LNC).
LINCOLN NATL-IN (LNC): Free Stock Analysis Report
PRINCIPAL FINL (PFG): Free Stock Analysis Report
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