Legal & General is to buy US-based Global Index Advisors (GIA), giving the UK group a stronger foothold in the US pension market.
GIA is an Atlanta-based investment adviser that focuses on target date funds and is in the top five of target date providers in the US. The acquisition, by the group's subsidiary Legal & General Investment Management America (LGIMA), is for a maximum consideration of $50.4 million and expected to complete by mid-2014, subject to shareholder approval.
The initial consideration is $30.75 million, with deferred consideration of $1.5 million payable over the period of two years from the date of completion and further payments of up to a maximum of $18.15 million payable over three years from the date of completion, subject to performance and other conditions being met including additional assets.
The maximum cash consideration of $50.4 million will be funded from surplus capital held within thegGroup. The acquisition is expected to be earnings accretive for Legal & General in its first year and deliver a return above the group's weighted average cost of capital.
The acquisition would push LGIMA's assets to over $50 billion, providing the broader group with scale and distribution in the $6 trillion US defined contribution market, where target date fund assets are forecast to grow substantially by 2017. The deal will also allow the UK business Legal & General Investment Management to grow assets in the defined contribution (DC) market in the UK and US.
Legal & General said international expansion of asset management was one of its five key themes for growth.
Mark Zinkula, chief executive of Legal & General Investment Management, said: 'International expansion and the DC market are two extremely important drivers of future growth for LGIM, and the acquisition of Global Index Advisors today will allow us to accelerate our expansion in the US DC market.
Wadham Downing, group M&A director at Legal & General, added: 'We are delighted to announce our first US acquisition and our first in the asset management theme. GIA brings a new dimension to LGIMA and our US DC proposition. With today's announcement on GIA, we have now agreed five bolt-on acquisitions in the last 12 months.'