Standard Life to buy Aberdeen in $4.7-bn stock deal

Standard Life, Scotland’s largest insurer, agreed to acquire Aberdeen Asset Management for about 3.8 billion pounds ($4.7 billion), a deal that would create the UK’s largest active manager. The stocks soared in London trading.

Under the terms, Standard Life shareholders will own 66.7 per cent of the combined group, according to a joint statement on Monday. Aberdeen’s investors will receive 0.757 new Standard Life ordinary share for each share they already own. That values it in line with its market value before the talks were disclosed March 4.

The deal, which will create a 660 billion-pound asset manager, is the latest move by the active management industry to combat a tide of investors shifting money to low-cost, passive funds. Aberdeen, hurt by weaker sentiment toward emerging markets, has suffered more than three years of redemptions, leading Chief Executive Officer Martin Gilbert to freeze salaries and cut costs. Standard Life’s investment unit also had outflows last year.

Aberdeen shareholders have no choice but to “accept a nil-premium takeover or risk a material dividend cut, possibly as soon as the interim results in May, due to the weak capital situation,” Paul McGinnis, an analyst at Shore Capital Group, wrote in a note to clients. “The uncertainty created by an offer and subsequent integration period could be unhelpful in attracting new money from clients.” Standard Life’s shares jumped more than 9.6 per cent, the most since September 2014, and were trading at 400.30 pence at 9:23 am in London. Aberdeen rose as much as 8.2 per cent, the most since June.

Mitsubishi UFJ Financial Group, Aberdeen’s largest shareholder with a 17 per cent stake, and Lloyds Banking Group, the third-biggest shareholder, support the deal, according to the statement.

REUTERS