Standard Chartered’s army of 1.3m small shareholders had a second dose of cheer this morning as its share price shot up 10 percent in response to the announcement late last night that they would be sharing windfalls of hundreds of pounds.
The company struck a deal to sell its 180-year-old Canadian business for £2.2bn, freeing up £1.75bn to be returned to shareholders – 73p a share.
That news was greeted by an 8% leap in the share price this morning, adding to the deal’s boost to shareholders’ pockets. Investors were given an average of 650 shares each when the company demutualised eight years ago.
Those who held onto that amount of shares will receive £474.50 from the sale - 73p a share - to the Canadian investment group Manulife Financial.
Shares in Standard Life rose 31.7p to 417.8p this morning.
At a time of low pay rises, that extra cash in people's pockets could give a welcome boost to the economy similar to that gained as people spent the windfalls from PPI misselling claims.
As part of the deal, Manulife will collaborate with Standard Life to continue distributing Standard Life Investments' funds in Canada, the US and Asia.
Standard Life has been restructuring its operations in the past three years under new management now led by group chief executive David Nish.
After returning £1.75bn of the proceeds to shareholders, the rest will be retained by the group for “general corporate purposes“.
The giant sale of its Canadian operation represents nearly a quarter of the entire stock market value of Standard Life.
Standard Life's Canadian operation sells long term savings and pensions products under the Standard Life Financial brand and investment management services as Standard Life Investments.
The return to investors will be structured so shareholders can either receive the money as income or capital, depending on their financial and tax preferences. When added together with dividends over the years, Standard Life shareholders will have received a total of 147p a share since 2010 - or £3.5bn. Despite the loss of income from Canada, the company pledged to continue its “progressive” dividend policy - City jargon for increasing dividends every year.
The deal is likely to have led to a big windfall for Standard Life's advisers in the City, JPMorgan Cazenove.
Standard Life said the Canadian pensions market was highly competitive and would be better served by a domestic player like Manulife.
The deal is so huge that shareholders in the British company will have to approve it at a special general meeting. It will also depend on gaining approval from regulators in Canada.