Principal Financial to Sell Australian Operations to Westpac

Iowa-based Principal Financial Group announced that it has reached a definitive agreement for the sale of its BT Financial Group businesses to Australia’s Westpac Banking Corporation for an initial payment of A$900 million ($488 million) and a future contingent payment, depending on how successful Westpac is in growing the business, of up to A$150 million ($81 million).

The move marks a retreat from the Australian market that Principal entered just three years ago when it paid A$2.1 billion ($1.14 billion) for BT Financial, at the time one of the country’s leading asset management firms. The announcement estimated after-tax proceeds of approximately U.S. $750 million. It said the amount “includes cash proceeds, tax benefits, and gain from unwinding the hedge asset associated with debt used to acquire BT in 1999.”

It expects to close the sale of BT and record an after-tax loss of approximately U.S. $350 million by year-end 2002.

According to a report from Dow Jones Newswires BT Financial has experienced “sharp fund outflows” and declining returns. The report indicated that the “sale to Westpac is no surprise as analysts and investors have urged the company to offload its struggling operation.”

Principal Financial Group Chairman, President and CEO J. Barry Griswell stated that, “The decision was made with a view toward focusing the company’s resources, executing on core strategic priorities and meeting shareholder expectations.” He emphasized the “tremendous opportunity in our U.S. defined contribution business, where we’re the 401(k) leader, and in our businesses in Latin America and Asia, where we continue to grow our earnings, assets under management and customer base.”

“This move reflects The Principal’s sharp focus on accelerating growth in our retirement services businesses and enables us to redeploy assets to produce greater value for shareholders than would continued ownership,” Griswell continued.