Principal Financial Group (PFG) plans to utilize $800-$900 million of capital in 2012 in strategic acquisitions, dividend payments and share repurchases. As a part of the plan the company inked a deal to buy a 60% stake in the Brazilian company Claritas Administra??o de Recursos Ltda. / Claritas Investments, Ltd. (Claritas) for an undisclosed amount.
With the transaction expected to close in April, the acquisition will not have any material impact in 2012, but will be accretive to earnings per share and return on equity subsequently.
Sao Paulo based Claritas deals with equity funds, balanced funds, managed accounts and other strategies for affluent clients and institutions through its multi-channel distribution network.
Recently the company approved a share repurchase program wherein the company is authorized to buy back up to $100 million worth of shares. The board also announced a dividend of 18 cents. The total deployment adds up to $154 million.
Principal’s actions continue to boost investor confidence in the company. The shares rose 1.2% to close at $27.99 on Thursday
Principal has grown its asset under management (“AUM’) over years. The addition of Claritas will further aid AUM growth as well as expand its mutual fund and asset management business in Brazil.
Besides, this acquisition marks the company’s second venture in Brazil. The earlier association in this country was with Banco do Brasil. Principal has been offering pension and annuity products through Brasilprev Seguros e Previdencia (”Brasilprev”), the joint venture since 1999. Principal holds 25% of the economic interest and 50.01% of the voting shares in the joint venture.
Claritas and Brasilprev, with respective AUMs of $1.8 billion and $27.4 billion, will help Principal to gain a leadership position in providing pension and long-term investment products in Brazil.
We retain our Neutral recommendation on Principal Financial. The quantitative Zacks #3 Rank (short term Hold rating) for the company indicates no clear directional pressure on the stock over the near term.
Based in Des Moines, Iowa, Principal Financial Group Inc. provides an expansive range of retirement savings, investment and insurance products and services through its various subsidiaries. The company competes with Lincoln National Corporation (LNC).
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