Wells Fargo's unloads retirement-plan unit for $ 1.2 billion
The unit serves 7.5 million retirement customers across the United States, offering 401 (k), pension, employee stock ownership and other services used by employers.
Principal Financial expressed confidence that the retirement plan business it's acquiring isn't stained by the deep cultural troubles uncovered at Wells Fargo.
"To the best of our knowledge, there are problems in this part of the organization, "Principal CEO Dan Houston told CNN Business.
Houston said Principal conducted "extensive" due diligence over the past six months examining the business and its employees.
"We feel very good about that," Houston said.
For the Des Moines, Iowa, based Principal, the Wells Fargo deal will double the size of its US retirement business and strengthen its foothold among mid-size employers. More than two-thirds of the accounts are from employers with plans ranging between $ 10 million and $ 1 billion. "We're excited. This is a real win-win for our customers and shareholders," Houston said.
The price tag on the deal could rise to $ 1.35 billion two years after closing if certain revenue targets are hit.
The Wells Fargo retirement businesses are served by 2,500 employees, including US workers in Charlotte, Minneapolis and Waco, Texas , as well as overseas in the Philippines and India.
Principal signaled it plans to keep most of those workers in place after the deal closes. That is expected to occur in the third quarter if regulators approve it.
"We don't anticipate much in the way of employees relocating to Des Moines," Houston said. Wells Fargo declined to comment beyond its press release.
Wells Fargo said it was advised on the deal at Wells Fargo Securities, the bank's investment banking division.
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