Standard Life sells insurer unit to Phoenix

Standard Life Aberdeen Plc is getting out of the insurance industry. The Edinburgh-based company agreed to sell the unit to Phoenix Group Holdings for £3.2 billion ($4.5 billion). The transaction will free up cash for Standard Life Aberdeen to pursue M&A deals as part of its ambition to become a $1 trillion money manager at a time when that part of the businesses is struggling to stem outflows.

“We felt that Phoenix was the more natural owner,” Gilbert said in a Bloomberg Television interview. “It’s a capital-heavy business and we’re more capital light.”

Asset managers across the globe are being battered by a move towards cheaper index-tracking funds, driving consolidation in the industry, including the combination last year of Standard Life Plc and Aberdeen Asset Management Plc. Co-chief executive officer Martin Gilbert has said the firm wants to expand in the US and Asia.

Under the terms of the deal, Standard Life Aberdeen will receive £2.3 billion in cash and a stake of almost 20 per cent in Phoenix. It will retain its UK retail platforms and advice business. For its part, Phoenix said it may raise about £950 million through a rights offer to help finance the transaction.

Standard Life Aberdeen shares rose as much as 4.8 per cent in London. Phoenix climbed as much as 7.6 per cent. Standard Life Aberdeen also announced that chairman Gerry Grimstone will step down next year.