Standard Life’s £3.8bn merger with Aberdeen Asset Management will create the UK’s largest asset manager.
The deal was agreed over the weekend for 286.5p a share, a slight premium to Aberdeen’s closing price on Friday. If the deal closes as scheduled later this year it will create a powerhouse with £660bn under management.
This is the latest step in Standard Life’s strategy to transform itself from an insurer into an asset manager.
The market welcomed the deal with the prices of both companies climbing when markets opened on Monday. Standard Life moved 6.2% higher to 402p while Aberdeen became 4.9% more expensive at 300.4p.
Aberdeen’s chairman, Simon Troughton, described the strategic fit of the deal as “compelling” due to minimal client overlap diversified by revenue, asset class and distribution.
“The combination will result in a material enhancement to earnings and this, coupled with a strong balance sheet, will facilitate significant investment in the business to support growth, innovation and a progressive dividend policy,” he added.
Management at the Edinburgh-based FTSE 100 group targets cutting around £200m of pre-tax costs each year, if the deal closes.
Cantor Fitzgerald analyst Keith Baird expects the deal to boost earnings by between 5% and 10%, subject to staff and revenue retention risks.
“The rationale for the deal must be diversification for both Standard Life and Aberdeen,” he added. “Standard Life has had success in growing its institutional business but has problems with GARS [Global Absolute Return Strategies] and mature insurance books.
“Aberdeen has a large emerging markets business which has struggled. Given the headwinds faced by the asset management industry from passive investing, pricing and regulatory pressures, this looks like a defensive deal.”
Gerry Grimstone (pictured) would be the group’s chairman, while Keith Skeoch and Martin Gilbert are set to become co-chief executives.
