Standard Life has struck a deal to acquire rival Aberdeen Asset Management for £3.8bn, creating the UK’s largest asset manager. The two companies confirmed this Monday morning the all-share deal which marks a further step in Standard Life’s evolution from a traditional insurer into an investment powerhouse. After the deal, the combined group would be Europe’s second-largest fund manager with £660bn in assets under management. Both firms combined their strengths to create a world class investment company.
Standard Life Poised to Disclose £3.8bn Aberdeen Takeover
Scotland’s financial services sector is bracing for upheaval due to hundreds if not thousands of job cuts, as Standard Life and Aberdeen Asset Management have finally merged. Standard Life said the group’s new name would incorporate both its name and that of Aberdeen’s and be based in Scotland. The two investment giants confirmed the deal worth £11bn. The planned combination will now create Europe’s second-biggest fund manager, with £660bn under management, but is being viewed as a sign of weakness, not strength. Back office functions at Edinburgh-based Standard Life and Aberdeen, headquartered in Scotland’s oil capital, are in line to bear the brunt of cost saving efforts. Standard Life will own 66.7% of the combined group, while Aberdeen will own the remaining one-third. The merger values each Aberdeen share at 286.5p, a 0.10% premium to its closing price of 286.40p on Friday.
Under the terms of the deal, Aberdeen shareholders will receive 0.757 new shares in Standard Life. Martin Gilbert, who co-founded Aberdeen in 1983 will remain its chief executive, and Keith Skeoch, who became chief executive of Standard Life in 2015, will become co-chief executives of the new business. A new board will be formed very shortly. Mr Gilbert has been searching for a merger partner for months as Aberdeen’s business is disproportionately exposed to emerging markets and his company’s funds have been plagued by investor withdrawals. Talks with Mr Skeoch intensified at the start of the year.
Desperate Aberdeen-Standard Life Merger Will Lead To Job Cuts
Aberdeen shares rose 6.3 per cent to 301.7p in early trade, while Standard Life was up 7.3 per cent to 406.3p. The merger deal has spread throughout the London market over this morning, with some traders already gaining money from speculative bets put a few weeks ago. As the acquiring party, Standard Life must respect the UK takeover rules. The deal come as mid-sized asset managers specialising in active management are under pressure from larger competitors such as BlackRock and Vanguard.
Both Aberdeen and Standard Life Investments focus on actively picking stocks and bonds, an investment style which has come under additional pressure from the rise of cheap index-tracking funds. One of their rivals, Henderson, recently merged with its US competitor Janus Capital in an attempt to fend off these competitive threats. By combining, asset managers often look to rip out redundant costs and also fire under-performing managers. Goldman Sachs analysts expect lots of job losses following the merger between the Scottish companies.
Significant Synergies and Cost Savings Measures
Aberdeen has a market value of £3.7bn and is almost half the size of Standard Life, which is worth £7.5bn. The two companies employ about 9,000 people in total. Following the merger of the FTSE 250-listed Aberdeen and the investment business of Standard Life, the combined group is planning to overtake Schroders, which oversees £397bn of assets, as the UK’s largest standalone fund company. Standard Life has been making a push into fund management over the past 10 years, distancing itself from its insurance roots in the process.
It is also important to state that Aberdeen Asset Management has faced significant problems due to its heavy focus on emerging markets, which have been out of favour with investors over the past four years. Last month, Aberdeen recorded its 15th consecutive quarter of net outflows, bringing total redemptions from the FTSE 250 asset manager to more than £100bn since the cycle of withdrawals began. A number of prominent hedge funds began betting against Aberdeen’s share price in light of those problems, although all short positions against the Scottish fund house were removed in January for the first time in four years.
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