Legal & General makes first US acquisition
Legal & General Group has agreed to acquire the business of Global Index Advisors (GIA), an Atlanta based investment advisor focused on target date funds (TDF).
GIA is in the top 51 of target date providers in the US. The acquisition, by the group’s subsidiary Legal & General Investment Management America (LGIMA), for a maximum consideration of USD50.4m, is expected to complete mid-2014, subject to fund shareholder approval.
Legal & General has identified international expansion of asset management as one of its five key themes for growth, and with this acquisition LGIMA now has proforma assets which exceed USD50bn.
The acquisition provides Legal & General with scale and distribution in the USD6trn US defined contribution (DC) market, where TDF assets are forecast to double by 2017.
GIA was formed in 1994 to create and market customer centric index target date fund products for the DC market and is investment sub-advisor to the Wells Fargo Advantage Dow Jones Target Date Funds which have USD15.6bn of assets.
The initial consideration is USD30.75m with deferred consideration of USD1.5m payable over the period of two years from the date of completion and further payments of up to a maximum of USD18.15m payable over three years from the date of completion, subject to performance and other conditions being met including additional assets. The maximum cash consideration of USD50.4m will be funded from surplus capital held within the group.
The acquisition is expected to be earnings accretive for Legal & General in its first year and is expected to deliver a return above the group’s weighted average cost of capital.
Mark Zinkula, chief executive officer, Legal & General Investment Management, says: “International expansion and the DC market are two extremely important drivers of future growth for LGIM, and the acquisition of Global Index Advisors today will allow us to accelerate our expansion in the US DC market. We are delighted to be working with Jim and his team who have been pioneers in this area and believe the opportunity to expand the business is significant.”
Jim Lauder, chief executive officer, Global Index Advisors, says: “We are excited to become part of LGIMA and the Legal & General Group. Our business model has always been about partnering with industry leaders possessing a strong desire to do the right thing for customers. Wells Fargo is an example of that. The opportunity to work with a company of L&G’s calibre and character is a perfect fit for that strategy. L&G’s knowledge and resources will allow us to not only reach more customers, but give those customers more innovative retirement solutions.”
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