Aberdeen flies high after £660m deal for Scottish Widows
Acquisition will cement fund manager’s status as challenger to its big US rivals
Tuesday 19 November 2013
For a man who once claimed not to like doing “very big deals”, Martin Gilbert seems unusually comfortable in the presence of bankers.
As the founder of Aberdeen Asset Management – and also chairman of First Group and Lloyd’s of London insurer Chaucer – the 58-year-old Scotsman has completed a few deals in his time, although yesterday’s takeover of Scottish Widows Investment Partnership by Aberdeen must rank among the most popular if share price movements are anything to go by.
Shares in the company soared 14.7 per cent – or 62.9p – to 489.7p after the fund manager finally tied up the £660m deal with Lloyds Banking Group following weeks of negotiations.
The agreement will boost the fund manager’s assets from £200bn to £336bn and cement its position as a serious challenger to its larger US rivals, such as BlackRock.
In the process, Aberdeen will overtake Schroders as Europe’s largest listed standalone fund manager.
“This transaction is significant for the long-term prospects of Aberdeen in a number of ways,” Mr Gilbert, its chief executive, said. “It strengthens our investment capabilities and adds new distribution channels. The acquisition of Swip adds scale to our business across a range of asset classes, and it also introduces a strategic relationship with Lloyds Banking Group.”
Aberdeen will finance the deal with shares worth about £560m, handing Lloyds a near-10 per cent stake in the group, which it must hold on to for at least a year.
It will also pay £100m in cash to Lloyds, provided five years’ targets are met, as part of a wider “strategic partnership” between the two companies covering Lloyds’ wealth, insurance, commercial banking and retail businesses. This tie-up will enhance Aberdeen’s exposure to retail clients as well as its traditional base of institutional investors.
The news came as Aberdeen reported a 39 per cent rise in pre-tax profits to £482.7m last year on revenues of almost £1.1bn.
Some analysts believe the company – which almost collapsed a decade ago over the split-capital trust mis-selling scandal – is now on the brink of even greater things.
Daniel Garrod at Barclays said: “The Aberdeen share has experienced some weakness recently and there is likely to be relief that Aberdeen did not have to sweeten this deal with cash up front and the multiple is still low.
“The quality of the acquisition is also likely to be better than originally thought, with an eight-year contract agreed with Lloyds over the life and wealth books.”
He was not alone in thinking along those lines. Phil Dobbin at Espirito Santo added: “At its pre-close [Aberdeen] stated that pre-tax profit would be at the top of consensus, which at the time was in the mid-£470m. We view this as a positive set of figures at the operational level and a well-priced acquisition.”
The Swip deal is expected to complete during the first quarter of the year.
Having boosted the company’s share price by almost 15 per cent on the first day, Mr Gilbert and his team will be hoping for more gains over the months and years ahead. So will his investors.
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