Empower Retirement to Buy Personal Capital

By Dave Sebastian

Empower Retirement said it is buying the personal-wealth management company Personal Capital Corp. for as much as $1 billion, in a move to expand Empower's financial-planning tools to individuals.

Empower, the second-largest retirement-plan recordkeeper in the U.S., said Monday it would pay $825 million to acquire Personal Capital. The deal also includes up to $175 million over two years, subject to achieving certain milestones. The Denver-based company is a subsidiary of Great-West Lifeco Inc.

Great-West Lifeco's sister company IGM Financial Inc. owns a 24.8% stake in Personal Capital, having invested $144.8 million in the startup since 2016. On Monday, IGM said it expects proceeds of $176.6 million from the deal with an additional $24.6 million expected from the earn out. IGM had valued its stake at $145.3 million, it said. Great-West Lifeco and IGM are both majority-owned by a unit of Power Corp. of Canada.

Empower said it aims to grow in retail advice and wealth management through the transaction. The company expects the acquisition to help it increase defined-contribution sales, managed accounts usage rates, participant engagement and the adoption of more services.

Empower said as of June 28 it had $656 billion in assets under management, while Personal Capital had $12.5 billion. Empower provides retirement plan services to more than 40,000 organizations, while Personal Capital has more than 2.5 million users accessing its free financial tools.

Personal Capital's gross revenue and assets under management grew about 60% from 2015 to 2019, Empower said.

Empower expects one-time integration expenses of $57 million over 17 months, as well as transaction expenses of $28 million. The company expects the deal to close in the second half of 2020.

Empower expects Personal Capital to add to its profits starting in 2023, following investments in customer-acquisition strategy in 2021 and 2022.

Empower and Great-West Lifeco executives said on an investor call that Personal Capital was able to weather the market volatility caused by the Covid-19 pandemic, with client retention rates equal to what they were prior to the health crisis.

"The Covid-19 crisis has been a bit of a test case for consumers' willingness" to engage with financial advisers digitally amid physical-distancing measures, said Paul Mahon, president and chief executive of Great-West Lifeco.

Write to Dave Sebastian at dave.sebastian@wsj.com

(END) Dow Jones Newswires

June 29, 2020 12:57 ET (16:57 GMT)

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