Published: Tue, March 07, 2017
Economy | By Melissa Porter

Standard Life and Aberdeen Asset Management agree £11 billion merger

Standard Life and Aberdeen Asset Management agree £11 billion merger

Scotland's largest insurer Standard Life plans to acquire Aberdeen Asset Management for about 3.8 billion pounds or $4.7 billion stock deal, one that would create the U.K.'s largest active manager.

The companies said the deal was subject to a number of conditions, including shareholder approval.

Under the terms of the deal Standard Life will pay Aberdeen shareholders 0.757 new Standard Life ordinary shares for each Aberdeen ordinary share.

Aberdeen's merger value will be at 286.5 pence per share with the fund's shareholders owning 33.3% of the newly merged group. Standard Life's Gerry Grimstone will be chairman. Aberdeen, hurt by weaker sentiment toward emerging markets, has had more than three years of redemptions, leading Chief Executive Officer Martin Gilbert to reduce expenses and freeze salaries for higher-paid workers.

Aberdeen has a market value of £3.7bn and is nearly half the size of Standard Life, which is worth £7.5bn, and rumours that Aberdeen was searching for a deal had spread throughout the London market over the past week, with some traders putting on speculative bets in recent days.

"Expect to see consolidation in the asset management industry continue, Henderson/Janus and Standard Life/Aberdeen are by no means unique in the pressures they are facing from passive management strategies now".

Ryan Hughes, head of fund selection at AJ Bell, said: "The proposed merger between Standard Life and Aberdeen makes strategic sense for both parties".

The new firm - which will have £357bn in insurance assets and £660bn in asset management, will be co-lead by Aberdeen chief executive Martin Gilbert and his counterpart at Standard Life, Keith Skeoch. More than 50 million of its shares changed hands in Dublin on Monday.

Peel Hunt gave shares of Aberdeen Asset Management PLC a price target of 280 indicating a potential decrease of -7.44% from Aberdeen Asset Management PLC's current price of 302.5.

Numis analyst Ewan Lovett-Turner said: "'We do not envisage any significant impact from the merger on most of the individual investment trusts (which have independent boards), although there are some areas of overlap for the combined group". Sky News first reported the talks.

These mainly concerned confirmation of projected cost savings of up to £200m, a figure which could herald the possibility of job losses among the companies' collective workforce of over 10,000 people.

The combination of our businesses will create a formidable player in the active asset management industry globally.

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