Aberdeen Asset Management and Standard Life hold talks about all-share merger

Lucy Hill
March 7, 2017

Standard Life and Aberdeen have announced a shock £11bn merger deal which is set to create the biggest active management group in the United Kingdom and the second largest in Europe.

Both sides said that the deal had compelling strategic logic and created a global powerhouse in active fund management - which is under huge pressure because of the rise of passive index-tracking-style investments.

Standard Life and Aberdeen announced in a statement this morning that they had agreed the terms of an all-share merger, valuing the smaller group at about £3.8 billion.

The investor update also says it will harness Standard Life and Aberdeen Asset Management's complementary capabilities and establish one of the largest and most sophisticated investment solutions.

Following the merger, investors in Aberdeen Asset Management would own approximately 33.3%, and investors in Standard Life would own approximately 66.7% of the combined company's shares.

Keith Skeoch, chief executive officer at Standard Life, said: "We have always been clear that it is Standard Life's ambition to become a world-class investment [organisation] and that this would be achieved through continued investment in diversification and growth, coupled with a sharp focus on financial discipline".

Standard Life's Skeoch and Gilbert will be co-CEOs of the merged companies, which will be headquartered in Scotland.

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Aberdeen shareholders would receive 0.757 of a new Standard Life ordinary share for each Aberdeen ordinary share.

The rise in passive investing, which invests in very low-priced funds that simply track a market, is hurting traditional fund managers, which are expensive and rely on fund managers generating outperformance.

Inevitably there will be some fund consolidation, with fund mergers or even fund closures taking place in order to cut costs in areas of commonality.

In terms of AuM the two asset management business are evenly matched and will now bring together Aberdeen's emerging market and Asian focus with Standard Life's behemoth in Gars and its fixed income and United Kingdom equities business.

The combined company will be based in Scotland and use branding from both companies. He said Standard Life's equity teams, who specialise in developed markets, would sit well with Aberdeen's emerging markets and Asia expertise to create "a really good global equities franchise".

One source mentioned a prospective annual cost savings figure of £200m, suggesting that job losses could be among the consequences of a deal.

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