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.
“Aberdeen has been overly reliant on Asian and emerging markets for a long time and this has created significant volatility in its business performance, while Standard Life will see those Asian and emerging market assets as very complimentary to its fixed interest and UK asset base.
“If the merger goes ahead, investors can expect a long period of fund range consolidation as the combined group looks to cut costs. This could create a period of uncertainty but until more news becomes available investors would be wise to stay patient.
“This merger is a continuation of consolidation in the asset manager industry and I would expect to see more as the market appears to move towards huge combined groups or small specialist boutiques.”
