NEW YORK (TheStreet) -- Shares of Aegon (AEG) - Get Report gained 2.5% to close at $5.75 with heavy trading volume on Friday after the life insurance company announced its acquisition of Mercer HR Services' record-keeping business.
Aegon will acquire Mercer's U.S. defined contribution administration book of business through an affiliate of its Transamerica unit. Following the acquisition the record-keeping business will transition to Transamerica Retirement Solutions, which the company says will become "a top 10 defined contribution record-keeper based on plan participants and assets."
Terms of the transaction were not disclosed.
Aegon expect the deal to close in the fourth quarter of 2015. The deal isn't expected to have a material positive impact on the company's earnings in 2016.
"This agreement with Mercer further strengthens Transamerica's leading position in the US retirement sector, with the know-how and broad capability to serve every retirement plan market segment," Aegon President and CEO Mark Mullin said in a statement.
About 2.8 million shares of Aegon were traded in regular trading hours Friday, above the company's average trading volume of about 1.2 million shares a day.
TheStreet Ratings team rates AEGON NV as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
We rate AEGON NV (AEG) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its increase in net income and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, disappointing return on equity and weak operating cash flow.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Insurance industry. The net income increased by 131.1% when compared to the same quarter one year prior, rising from $174.56 million to $403.44 million.
- AEG, with its very weak revenue results, has greatly underperformed against the industry average of 12.3%. Since the same quarter one year prior, revenues plummeted by 84.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- AEG's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 25.93%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, AEG is still more expensive than most of the other companies in its industry.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Insurance industry and the overall market on the basis of return on equity, AEGON NV underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full analysis from the report here: AEG