Bain investment in Lincoln lower than headline price, says JPMorgan

JPMorgan keeps an Underweight rating on Lincoln National (LNC) after the company announced a strategic partnership with Bain Capital whereby Bain will acquire a 9.9% stake in Lincoln in exchange for a non-exclusive investment management agreement, subject to minimum commitments. The capital infusion is a positive for Lincoln’s capital position and should help re-position the company’s liability mix towards spread-based products, the analyst tells investors in a research note. However, JPMorgan says the valuation for Lincoln implied by Bain’s investment is not as high as the reported $44 per share headline after considering the commissions Bain would have paid on originating the assets under management through more traditional sources. Assuming savings on origination of 3% on average assets under management of $10B, Bain’s cost for buying into Lincoln would have been $525M, or closer to $28 per share, JPMorgan contends. The stock in morning trading is up 2c to $28.99.