(Reuters) - Top U.S. retirement plan administrator Principal Financial Group (NASDAQ:PFG) said on Tuesday it would buy Wells Fargo (NYSE:WFC) & Co's retirement plan services business for $1.2 billion, as it seeks a larger presence in markets serving mid-sized companies.
The agreement includes an earnout of up to $150 million tied to better-than-expected revenue retention, payable two years after closing, likely in the third quarter, Principal Financial said.
"Principal will gain a strong foothold with mid-sized employers as more than two-thirds of Wells Fargo's institutional retirement assets are in plans ranging from $10 million to $1 billion," the company said. https://reut.rs/2uRbzQ2
The deal will be financed with cash and debt and will add to net income and adjusted earnings per share in 2020, Principal Financial said.
Wells Fargo has been looking to trim its business ever since it came under regulatory scrutiny following a sales practice scandal. In 2018, the Federal Reserve slapped it with an unprecedented asset cap, citing "widespread consumer abuses and compliance breakdowns".
The bank is scheduled to announce its first-quarter results on Friday.
Lazard is the financial adviser to Principal, while Debevoise & Plimpton provided legal counsel.
