Wells Fargo & Co WFC said Tuesday that it reached an agreement to sell its Institutional Retirement & Trust business to Principal Financial Group Inc PFG.
What Happened
Wells Fargo is divesting its IRT business — which includes its retirement plan recordkeeping and administrative services, executive deferred compensation, institutional trust and custody and institutional asset advisory businesses — for $1.2 billion.
Wells Fargo's asset sale is consistent with its strategy to better allocate resources on areas where it can grow and maximize opportunities, the company said. Management is focusing on three areas of business: wealth, brokerage and asset management.
The bank also said Principal Financial should gain new scale from combining its IRT business. The deal should also benefit clients, plan participants and team members, Wells Fargo said.
Why It's Important
In addition to increased scale, Principal said it will gain a "strong foothold" among mid-sized employers.
More than two-thirds of Wells Fargo's institutional retirement assets are found in plans that range in sizes from $10 million to as much as $1 billion.
What's Next
Principal expects the deal to support net income and non-GAAP operating per-share earnings in 2020.
The deal is expected to close in the third quarter of 2019 and remains subject to standard regulatory approval. Once finalized, Principal will become one of the largest retirement providers in the sector.
Wells Fargo shares were down 1.37 percent at $48.21 at the time of publication Tuesday, while Principal Financial shares were down 2.21 percent at $52.14.
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