Double trouble at the top of Standard Life
Pension giant hit by savings exodus after mega-merger
Are two heads really better than one? that is the question being asked with increasing urgency about Standard Life Aberdeen after its largest shareholder sold its entire stake last week.
the investment group, whose shares are widely held by small investors and which provides pensions for millions of savers, has been run by two chief executives, Martin Gilbert and Keith Skeoch, since Standard Life merged with Aberdeen Asset Management in 2017.
Doubts are growing as to whether this arrangement should continue.
Until last Friday, Mitsubishi UFJ, a Japanese bank, had owned 5.9pc of the investment giant. When it announced it had sold the whole lot, for £349.3m, murmurings of unease regarding SLA’s two-headed leadership began to emerge.
Mitsubishi UFJ avoided mentioning SLA’s bosses when it revealed the sale of its stake, claiming it had other reasons for dropping out.
BUT more than a million individual savers hold shares in SLA, and many may be wondering whether it’s time for them to follow Mitsubishi and sell too.
A number picked up the shares for free when Standard Life demutualised in 2006 and became a public company, turning its members into shareholders. Standard Life’s share price climbed as high as 502p in 2015, but since the merger with Aberdeen has slumped 44.4pc to 235p. the complexity of the deal, and the plunging share price, has added to the tension among the shareholder base. they worry that self-confessed intellectual Skeoch, 62, and forthright Gilbert, 63, may not be able to agree on where to take their business.
Certain major shareholders are understood to have approached chairman Sir Douglas Flint asking that the pair step down so new blood can be brought in.
their demands are understandable. Few businesses have had much luck with co-chief executives.
Just four years after Deutsche Bank appointed Anshu Jain and Juergen Fitschen as joint bosses in 2011, the partnership ended as investor unrest erupted over the direction of the bank.
When asset managers Janus Capital and Henderson Global Investors merged in 2017, Andrew Formica and Dick Weil took the helm.
But just a year later – and sooner than anyone expected – Formica stepped down.
Sources close to SLA said there is not likely to be any imminent change, but hinted the top brass at the business will look very different in five years’ time.
Yet John Moore, senior investment manager at Brewin Dolphin, thinks now is not the time for savers to get cold feet.
‘Investment is a long-term game,’ he says, adding that ‘if you’re looking at the business for the next five to seven years, a lot of these things will sort themselves out’.
Moore suggests that suspicion directed towards Gilbert and Skeoch may be an effect of shareholders getting impatient, and wanting the promised benefits of the merger to materialise sooner.
Last year was particularly tough after SLA lost a £109bn investment contract along with its biggest customer, Lloyds Banking Group.
Months later, Lloyds severed the last of its ties with SLA as it sold its 3.3pc stake in the firm. Issues like this may have made investors think progress at SLA had stalled, Moore explains.
‘they might think two chief executives equals two opposing views,’ he says. ‘that would then feed those insecurities about why things haven’t progressed so quickly.’ Chris turner, however, an analyst at Berenberg, is more pessimistic about SLA, saying: ‘We see risk, not value.’
He thinks it will deliver lower growth than its peers this year, and that the restructuring which has followed the combination of Standard Life and Aberdeen makes it hard to predict how earnings will pan out in the near term.
Most analysts are still bullish on SLA’s prospects. ten of the 18 research houses following its fortunes have stamped it with a ‘buy’ recommendation.
Moore points out that ‘ in a period of uncertainty, it is right to have as much experience around the table as you can get your hands on’. For that reason, investors needn’t worry too much about SLA’s pair of chief executives, who have decades of high level experience between them, he says.
But persistent below-par share price performance would be a huge problem for SLA, whose business, after all, is delivering investment growth to savers.
If the gloom goes on, shareholders will legitimately wonder why it can’t deliver better growth itself.