Standard Life and Aberdeen agree to £11bn merger

By Monira Matin and Francis Nikolai Acosta

Added 6th March 2017

Standard Life and Aberdeen Asset Management have agreed to merge in an astonishing £11bn (€12.7bn, $13.5bn) deal, following a weekend of intense talks.

Standard Life and Aberdeen agree to £11bn merger

On Saturday, the firms were forced to put out a statement that they were in merger talks.

According to a stock exchange announcement posted on Monday, the firms have agreed terms for an all-share merger, which will create one of the UK's largest fund managers, overseeing assets worth £660bn.

Following completion of the merger, Standard Life shareholders would own 66.7% of the combined group, while Aberdeen shareholders would own 33.3%.

That reflects Aberdeen's £3.8bn market capitalisation and Standard Life's £7.5bn value. 

The regulatory announcement also said the firms will incorporate both their names in a re-brand once the merger goes through, with speculation Standard Aberdeen could be the new name. 

The decision to drop Life from its name falls in line with Standard Life’s strategy in recent years as it has shifted its focus from being a traditional insurer to an investment manager.

“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,” Standard Life’s chief executive Keith 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.”

Proposed management structure

Both firms expect that the board of directors of the combined group would comprise equal numbers of Standard Life and Aberdeen directors.

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

Aberdeen’s Martin Gilbert and Standard Life’s Keith Skeoch, will become co-chief exectives of the combined group. Bill Rattray of Aberdeen and Rod Paris of Standard Life would become chief financial officer and chief investment officer, respectively.

JVs on the horizon

The talks come at a time when active fund managers globally are facing dwindling sales, rising costs and fee pressures. Capital continues to pour out of active funds and into passive products and the underperformance of actively-management funds versus their benchmarks has been pointed out in various reports from S&P and Morningstar.

Those difficulties have made the industry's chief executives look at strategic alliances or joint ventures, or plot a merger or acquisition with other firms, according to a PwC survey, as reported. 

Example of these activities are the Henderson and Janus Capital merger deal, which is expected to be completed in the second quarter this year, and Amundi’s purchase of Pioneer Investments, which is expected to be completed in the first half.

Strategic alliance

Ryan Hughes, head of fund selection at AJ Bell said: “The proposed merger between Standard Life and Aberdeen makes strategic sense for both parties.

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