ING to Buy CitiStreet for $890 Million
ING said in a statement it would pay €578 million ($890 million) for the company, which is jointly owned by Citigroup and State Street.
“This acquisition significantly expands our existing footprint in our retirement services businesses in the US and will help drive long-term growth in the U.S. retirement savings marketplace,” Tom McInerney, chief executive for ING Insurance Americas, said in a statement.
ING shares were up 2 percent at €25 ($38.47) by 0935 GMT, in line with the DJ Stoxx banks index.
The combined operations of ING and CitiStreet will make it the third-largest defined contribution business in the United States with €224 billion ($344.7 billion) assets under management and 14 million plan participants, ING said.
Lehman Brothers analyst Nick Holmes said at first glance the acquisition may make sense strategically, but it did not look cheap.
He said ING has indicated that the acquisition’s target return on investments are a minimum 10 percent after 3 years, rising to 12 percent after 5 years, both of which are below ING’s current group return on equity.
“We imagine that ING is hoping for higher returns than these in the longer term derived from gaining access to CitiStreet’s customer base,” Holmes said in a client note.
ING said the acquisition is expected to yield significant synergies and it will be earnings per share accretive by 2010, excluding merger-related expenses and amortization of customer-based intangible assets.
(Reporting by Harro ten Wolde; Editing by David Cowell and Jason Neely)
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