Ascensus entered into an agreement to acquire Upromise Investments, Sallie Mae's 529 college savings plan administrator, confirmed Neil Smith, executive vice president, strategic business support services at Ascensus.
Terms were not disclosed, and the acquisition is pending regulatory approval. The transaction is expected to close in the fourth quarter.
It is Ascensus' first entry into the college savings plan area. Upromise increased its assets under administration to $49 billion from $11 billion since Sallie Mae acquired it in 2006. The merger will make Ascensus the largest independent service provider in the industry, Mr. Smith said in an interview.
The transaction does not include Upromise Rewards, which is Sallie Mae's college savings program that provides financial rewards for college savings on everyday purchases. Mr. Smith said the Upromise brand will remain with Sallie Mae and that Ascensus will likely announce a new brand by the time the deal closes. The entire senior management team at Upromise Investments will join Ascensus.
Mr. Smith said Ascensus was looking at ways to diversify its revenue and thought Upromise was a complementary addition to its 401(k) service provider business. He added it allows Ascensus to enter a new market with similar characteristics and that it now has immediate scalability with 529 plans.
The combined firms will administer more than $90 billion in assets.
BMO Capital Markets served as financial adviser to Ascensus; Bank of America Merrill Lynch, to Sallie Mae.