Yesterday, Principal Global Investors, LLC, a unit of Principal Financial Group (PFG), announced that it would purchase a 74% stake in London-based Origin Asset Management, LLP.
The acquisition of Origin would strengthen Principal’s global equity capability, broaden its product suite, as well as enhance its investment potential in emerging markets and in global small and mid-cap companies that seek high quality investments. Moreover, the company would also benefit from Origin’s strong reputation and distinct investment expertise.
The deal, which is subject to regulatory approval, is expected to close in the fourth quarter of 2011 and is likely to be non-accretive to 2011 earnings per share (EPS). However, it would start reflecting its synergy in 2012 EPS.
The Origin transaction, valued at $66 million, will be the third in the series of acquisitions by Principal so far this year. Principal is actively seeking acquisitions to expand its equities business, for which it had allotted $700 million.
As such, Principal Global Investors, the investment arm of the company, announced to acquire the majority share in Finisterre Capital LLP, and Finisterre Holdings Limited. Principal acquired a 51% stake by making an initial payment of $85 million. The acquisition will help Principal fortify its emerging market investment capabilities through the launch of new emerging market products and strategies on a widened platform.
Also, Principal Financial Group, S.A. de C.V., has agreed to acquire HSBC AFORE, S.A. de C.V. (HAFO), the pension funds management business of Grupo Financiero HSBC, SA de C.V. for a purchase consideration of about $198 million. The acquisition would enhance Principal’s presence in Mexico and is expected to close in the third quarter of 2011.
Principal deploys its capital firstly to enhance its existing business scale and secondly to add new capabilities that provide a future growth base.
Along with these acquisitions, in May, Principal also renewed its authorization to repurchase up to $250 million of the company's outstanding common stock.
Principal also stands solid from a balance sheet perspective. Its risk-based capital ratio is expected to be at 425%. Relative to a 350% RBC ratio, the company has approximately $1.9 billion of total excess capital. The excess capital at the holding company is $1.1 billion, with $280 million committed to its recent acquisitions that are expected to be funded in the third quarter.
Besides the capital cushion, Principal also has around $84 million left to be deployed in 2011 for appropriate acquisitions and return of capital to shareholders. Since the company is shifting to a fee-based business model, it will need less capital for organic growth, thereby enhancing its free cash flow generation. This would improve the company’s ability to increase shareholder value over time through a strategic capital redeployment. Further, the strength of its balance sheet provides it with ample financial flexibility and as such the company is looking for opportunities to grow the enterprise in 2011 and beyond.
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
Be the first to comment