Long-term rival financial companies Standard Life and Aberdeen Asset Management have agreed to merge in a shock £11bn (US$13.5bn) move, following a weekend of talks and speculation.
Details of the deal were revealed early this morning via a joint stock exchange announcement that stated that terms have been agreed for an all-share merger between the companies.
Following completion of the merger, Standard Life shareholders would own about two thirds (66.7%) of the combined group, with Aberdeen shareholders owning around one third (33.3%), with Standard Life valued at £7.5bn and Aberdeen at £3.8bn.
The proposed deal, which is, some might say, technically an acquisition of Aberdeen by Standard Life, will create one of the UK’s largest fund managers, with assets of around £660bn under management between the two Scottish companies.
The regulatory announcement also said the firms aim to incorporate both their names in a re-brand once the merger its given the rubber stamp, with the name Standard Aberdeen predicted.
Standard Life chairman Sir Gerry Grimstone is set to become chairman of the board of the combined group, with Aberdeen’s chairman Simon Troughton becoming deputy chairman.
Keith Skeoch, chief executive of Standard Life and Martin Gilbert, chief executive of Aberdeen, would become co-chief executives of the combined group. Bill Rattray of Aberdeen and Rod Paris of Standard Life would become chief financial officer and chief investment officer respectively.
Commenting on the deal Skeoch, said that the combination of our businesses will create “a formidable player” in the active asset management industry globally. “We strongly believe that we can build on the strength of the existing Standard Life business by combining with Aberdeen to create one of the largest active investment managers in the world and deliver significant value for all of our stakeholders,” he said.
Martin Gilbert, chief executive of Aberdeen called the merger “excellent for our clients”, bringing together the “strong and highly complementary” investment capabilities of each firm. “This merger brings financial strength, diversity of customer base and global reach to ensure that the enlarged business can compete effectively on the global stage,” he said.
Recent industry consolidation
The announcement of the deal follows recent acquisitions and mergers in the industry with, as reported, Amundi’s planned purchase of Pioneer Investments and the Henderson and Janus Capital merger, both of which are expected to be completed by the second quarter this year.
The news also comes in the same weekend that German financial giant Deutsche Bank announced its plans to break up its business and sell its asset management arm.
Ryan Hughes, head of fund selection at AJ Bell called the proposed merger between Standard Life and Aberdeen “a continuation of consolidation in the asset manager industry” and that he expects to see more as the market appears to move towards “huge combined groups or small specialist boutiques”.
Hughes said that the deal makes “strategic sense” for both parties. Aberdeen has seen huge outflows of business in recent times having been overly reliant on its Asian and emerging markets “for a long time”, with the Singpaore-bassed team and Asian star fund manager Hugh Young prominent.
“This has created significant volatility in its business performance, while Standard Life will see those Asian and emerging market assets as very complimentary to its fixed interest and UK asset base,” said Hughes.
If the merger goes ahead as planned, Hughes warned that investors can expect a “long period of fund range consolidation” as the combined group looks to cut costs. “This could create a period of uncertainty but until more news becomes available investors would be wise to stay patient,” he said.