10 March 2017

Standard Life agrees merger with Aberdeen

Standard Life is acquiring Scotland-based Aberdeen Asset Management in an all-scrip deal worth around GBP 3,776 million. The implied offer price can be valued at GBP 2.87, representing an 18.5 per cent discount to the target’s close of GBP 3.51 on 23rd October 2015, the last trading day before news of the deal was first reported. As a result of the transaction, the merged entity will be held 66.7 per cent owned by Standard Life’s shareholders, with Aberdeen’s owners controlling the remaining stake.

While the boards at both companies have given the go-ahead, Standard Life still requires antitrust clearances, as well as approvals from public shareholders and the Court of Session in Edinburgh before closing the deal by September this year. The amalgamated group, worth more than USD 13,500 million as reported by the Wall Street Journal, will manage a combined GBP 660 million of assets. According to Zephyr, the M&A database published by Bureau van Dijk, this is the seventh-largest among announced or completed deals that target investment managers worldwide.

“The combination of our businesses will create a formidable player in the active asset management industry globally.” Standard Life’s chief executive Keith Skeoch said, “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."

Both asset managers have suffered fund outflows as investors are increasingly moving their money to passively managed portfolios, which charge lower management fees, resulting in better returns. Heavily invested in emerging markets, Aberdeen has also been affected by weaker investor confidence in the developing world, according to Bloomberg.

Others plagued by the growing preference over index funds include asset managers Henderson Group and Janus Capital. According to the Wall Street Journal, the net withdrawal from Henderson Group’s funds amounted to GBP 2,000 million in the first half of 2016, while Janus Capital had net outflows of USD 300 million during the same period. This prompted both companies to agree on a USD 2,615 million merger last October, a move that will allow them to expand their geographic presence, as well as to create economics of scale, which is expected to cut USD 110 million in costs annually.

Standard Life has appointed Goldman Sachs as a financial advisor, while Aberdeen is being assisted by JP Morgan and Credit Suisse.

© Zephyr