Legal & General Group Plc Makes $50m Acquisition

Legal & General Group Plc (LON: LGEN) pursues overseas expansion.

Mark Stones

Mark Stones (TMFMumbojumbones) joined The Motley Fool in 2014 and initially worked as a writer for Fool.co.uk, before joining the Fool’s analyst programme. Mark earned a BA in English from Loughborough University. Although he spends more time reading annual reports than Russian literature these days, he still appreciates a novelist’s antipathy toward the accepted view, which is a useful attitude when trying to sniff out hidden gems on the stock market. His approach to investing has been largely influenced by the principles of Warren Buffett and Peter Lynch. He also takes a special interest in the work of healthcare companies. Outside of investing, Mark plays guitar, enjoys good writing and has a guilty passion for combat sports.

Published 21 February, 2014 8:51 am GMT

| More on: LGEN

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The share price of Legal & General (LSE: LGEN) (NASDAQOTH: LGGNY.US), one of the UK’s biggest insurance companies, increased 1% to 242p this morning, following an announcement that the company has agreed to acquire Global Index Advisors, an Atlanta-based investment advisor, for $50m.

The deal is expected to be completed by mid-2014, subject to fund shareholder approval.

Legal & General has been seeking acquisitions in the United States in an extension of a growth strategy that has seen it acquire a number of UK targets thus far, such as the purchase of Cala Homes from Lloyds last year for £210m.

The acquisition of GIA, which is among the top five target date providers in the US, marks Legal & General’s first acquisition across the Atlantic, and will expand the group’s assets to £50bn.

The FTSE 100 member added that the acquisition will give the group with scale and distribution in the $6tn US defined contribution market. As a result, Legal & General expect earnings will be boosted in its first year, and the deal could deliver a return above the company’s weighted average cost of capital.

Mark Zinkula, L&G’s chief executive, commented:

“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. We are delighted to be working with Jim and his team who have been pioneers in this area and believe the opportunity to expand the business is significant.”

Before today analysts were predicting that Legal & General’s upcoming final results would reveal earnings of 16.5p per share. Based on today’s shift in share price, the shares may therefore trade on a P/E of of 15, and a dividend yield of 4.25% is offered.

Of course, the decision to ‘buy’ — based on those ratings, today’s announcement combined with your faith in Legal & General’s growth strategy — is solely your decision.