Empower to acquire MassMutual's retirement business

In the retirement industry, the acquired acquire more, the merged keep merging -- but at some point, will there be anyone left to merge or acquire?

“With today’s announcement, Empower is taking the next step toward addressing the complex and evolving needs of millions of workers and retirees through the combination of expertise, talent and business scale being created,” said Edmund F. Murphy III, President and Chief Executive Officer of Empower Retirement.

It was no secret that MassMutual was looking to sell its retirement services division this summer. But the unknown factor was who would buy it. Today Empower Retirement announced it has agreed to acquire MassMutual’s retirement plan business.

Empower Retirement is the retirement services division of Great-West Lifeco, of which Power Financial has a controlling interest. Empower has been in a spending spree this year, signing an agreement in June to acquire Personal Capital, a digital-first registered investment adviser and wealth manager.

Approximately 2.5 million participants in 26,000 workplace retirement plans will come over to Empower after the MassMutual deal closes, along with $167 billion in assets. Along with that come 2,000 employees. Earlier reports had estimated a price tag of at least $2 billion for the unit, and they weren’t far off, as Empower gets the MassMutual unit in a  reinsurance transaction, becoming the new risk carrier, for a ceding commission of $2.35 billion.

MassMutual Retirement was one of only seven DC plan providers to receive above-industry average rankings for plan sponsor satisfaction, a Cogent Syndicated study revealed in July.

After private equity bowed out of the acquisitions process, the suitors were narrowed in the second round to asset managers but not “pure recordkeepers,” according to Barron’s, because the company wanted one buyer for the business.

In 2013, MassMutual had expanded its retirement business with the acquisition of The Hartford’s retirement plan business. At the time, MassMutual CEO Roger Crandall said that the transaction would expand the company’s retirement plan participants to almost double.

Ironically, The Hartford had been selling off units to focus more closely on what it considered its core business, something which apparently MassMutual is doing as well now. In spring 2019, MassMutual put its OppenheimerFunds unit up for sale, which Invesco bought for $5.7 billion, according to Reuters.

The retirement industry has seen a massive wave of mergers and acquisitions in the last decade.

Empower was created as a rebranding of Great-West Financial’s retirement business in October 2014. In a press release at the time, the company noted it had recently completed its acquisition of the J.P. Morgan Retirement Plan Services large-market recordkeeping business and was integrating the retirement business of Putnam Investments. Headquartered in Greenwood Village, a southern suburb of Denver, Empower Retirement administers $656 billion in assets for more than 9.7 million retirement plan participants as of May 31, 2020, according to the company.

READ MORE: