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Aberdeen and Standard Life agree to stunning mega-merger

Aberdeen and Standard Life agree to stunning mega-merger

The boards of Standard Life and Aberdeen Asset Management have agreed to a stunning £11 billion ($13.5 billion) merger. 

After being forced to rush out statement on Saturday afternoon to confirm they were in merger talks, the pair remained in discussions for the rest of the weekend.

According to a regulatory announcement posted on the stock exchange this morning, the firms incorporate both their names in the re-brand, with speculation suggesting Standard Aberdeen could be the frontrunner.

The move to erase Life from its name would represent the metamorphosis of Standard Life, which was formed 146 years ago, from a traditional insurer to an investment giant. 

'We have always been clear that it is Standard Life’s ambition to become a world-class investment company and that this would be achieved through continued investment in diversification and growth, coupled with a sharp focus on financial discipline,' Skeoch told the market. 

'We are therefore delighted that this announcement marks another important step towards achieving that ambition. 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.'

Gilbert added: 'We believe this merger is excellent for our clients, bringing together the strong and highly complementary investment capabilities of each firm with a breadth and depth of talent unrivaled among UK active managers and positioning the business to meet the evolving needs of clients and customers.'

'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.'

Seven years in the making 

It is believed Standard Life chair Sir Gerry Grimstone first approached Aberdeen over a potential tie up seven years ago.  The talks went to the next level last August as the rise of passive investment increased the pressure on active fund managers. 

'This merger brings together two fine companies and I'm greatly honoured to be asked to chair the combination,' Grimstone said. 

'I look forward to welcoming our new colleagues. We will be successful as long as we continue to put our clients. Customers, employees and good governance at the heart of what we do.' 

Under terms of the possible all-share merger Aberdeen shareholders would own 33.3% and Standard Life 66.7% of the combined group. 

The merger would create a company with £660 billion ($811 billion) of assets, employing 9,000 people.

Keith Skeoch (pictured right), CEO of Standard Life and Martin Gilbert (pictured left), CEO of Aberdeen, would become co-CEOs of the combined group. 

In addition, Bill Rattray of Aberdeen and Rod Paris of Standard Life would become CFO and CIO respectively.

Standard Life chairman Gerry Grimstone would become chairman of the board of the combined group, with Aberdeen’s chairman Simon Troughton becoming deputy chairman.

In a joint statement from Aberdeen and Standard Life, the firms said 'their long-term success has been built through differentiated, but complementary, strategies that have delivered attractive growth and returns for clients and shareholders'.

The duo said the potential merger represented an excellent opportunity to leverage Standard Life and Aberdeen’s combined strengths to create a world class investment company.

The pair highlighted seven compelling reasons for the merger:

  • [It would] harness Standard Life and Aberdeen’s complementary, market leading investment and savings capabilities which would deliver a compelling and comprehensive product offering for clients covering developed and emerging market equities and fixed income, multi-asset, real estate and alternatives.
  • Establish one of the largest and most sophisticated investment solutions offerings globally, positioning the combined group to meet the evolving needs of clients.
  • Reinforce both Standard Life and Aberdeen’s long-standing commitment to active management, underpinned by fundamental research, with both global reach and local depth of resources.
  • Create an investment group with strong brands, leading institutional and wholesale distribution franchises, market leading platforms and access to long-standing, strategic partnerships globally.
  • Bring scale, as one of the largest active investment managers globally with £660 billion of proforma assets under administration and financial strength, transforming the combined group’s ability to invest for growth, innovate and drive greater operational efficiency.
  • Deliver through increased diversification an enhanced revenue, cash flow and earnings profile and strong balance sheet that is expected to be capable of generating attractive and sustainable returns for shareholders, including dividends.
  • Result in material earnings accretion for both sets of shareholders, reflecting the significant synergy potential of a combination.

Aberdeen has endured a tricky year and half as investors have withdrawn from emerging markets, its area of specialty, resulting in consistent outflows.

Gilbert (pictured above) has made little secret of his desire to find a merger partner or some kind of deal for the firm.

In November last year he told reporters that he would like to do a deal like the merger between Henderson and Janus, but that there was ‘nothing on the horizon’.

The firm previously explored a deal for the whole of Pioneer when it was up for sale by parent UniCredit last year.

‘We were through to the second round but we withdrew,’ Gilbert told Bloomberg in November last year. ‘We couldn’t quite afford the €3.5 billion that it’s going to go for. I wish we could find something, but there’s nothing at the moment.’

Standard Life has recently seen the short-term dip in performance of its flagship fund Standard Life Global Absolute Return Strategies.

The terms of the merger are 0.757 new Standard Life shares for each Aberdeen one. Taking the current value of Standard Life shares this values each Aberdeen share at 286p.

 

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