Prudential Insurance Company of America has inked a deal to acquire $7.5 billion in pension obligations from Verizon Communications Inc.
The transfer of the telecommunication carrier’s pension obligations under the Verizon Management Pension Plan to Prudential, Newark, N.J. (NYSE: PRU), is expected to occur in December, Prudential disclosed today.
The transaction calls for Verizon to purchase a group annuity contract from Prudential to satisfy periodic payment obligations to Verizon retirees under the plan; and for Prudential to assume responsibility for the payments.
Prudential says the agreement covers approximately 41,000 Verizon Management Pension Plan participants who retired and started receiving pension benefits before January 1, 2010.
Commenting on the deal, John Nadel and Alex Levine, both analysts at the brokerage firm Sterne Agee, Birmingham, Ala., write in a press statement that they expect Prudential to deploy about $400 million of equity to support the transaction. The investment would likely contribute about $0.12 to Prudential’s earnings per share in 2013, assuming a 13-14% return on earnings.