According to announcements from Schwab and Nationwide, the $115 million deal is expected to close by the end of the first quarter in 2007 with The 401(k) Company set to join the Schwab Investor Services Enterprise, which includes Schwab’s Corporate & Retirement Services division.
Schwab said The 401(k) Company complements its retirement business strategy, noting it had seen “strong growth” in the small, mid and large retirement plan segments, but that The 401(k) Company had been particularly successful in winning mega-plan segment business. During the past two years, The 401(k) Company’s newly acquired plans have averaged more than $500 million in assets and more than 8,000 participants, according to Schwab.
“Joining forces with The 401(k) Company expands our ability to serve the marketplace,” said James McCool, executive vice president of Schwab’s Corporate & Retirement Services division, in the Schwab press release. “We have been consistently investing in and growing our retirement plan business at Schwab, primarily serving clients in the small, mid and large segments. In addition to this ongoing investment, we are now, for the first time, making a significant investment in serving employers and their employees in the mega plan segment.”
Nationwide said it would be better able to concentrate on its strengths. “This transaction will enable our private-sector business to focus on our core markets, which are small and micro 401(k) plans,” said Mark Thresher, president and chief operating officer of Nationwide Financial, in his firm’s statement. “By sharpening our focus, not only will we better serve this market, but we also will be able to more effectively deploy capital through reinvestment in core businesses.”
When the transaction is complete, Nationwide Financial will administer approximately $26 billion in private-sector retirement plans.