TWO of the UK’s biggest investment companies, Aberdeen Asset Management and Standard Life, have confirmed they are holding talks about a possible £11 billion all-share merger.
The move would create one of the world’s largest industry powerhouses, overseeing £660bn worth of global assets, to invest for growth, innovate and drive greater operational efficiency.
Under the terms of the potential merger, Aberdeen shareholders would own 33.3 per cent and Standard Life shareholders would own 66.7 per cent of the combined group.
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Standard Life chairman Sir Gerry Grimstone would become chairman of the board, with Aberdeen’s chairman Simon Troughton becoming deputy chairman. Standard Life and Aberdeen’s current chief executives, Keith Skeoch and Martin Gilbert would become co-chief executives.
Bill Rattray of Aberdeen would become chief financial officer and Rod Paris of Standard Life would serve as chief investment officer.
The companies said the deal was still subject to a number of conditions, including shareholder approvals, but added that the potential merger would be an “excellent opportunity” for both companies.
A joint statement said: “Standard Life and Aberdeen’s long-term success has been built through differentiated, but complementary, strategies that have delivered attractive growth and returns for clients and shareholders.
“The potential merger represents an excellent opportunity to leverage Standard Life and Aberdeen’s combined strengths to create a world class investment company.
“It is envisaged that the board of directors of the combined group would comprise equal numbers of Standard Life and Aberdeen directors.The combined group would draw on the expertise across its markets and would endeavour to harness the talent in both companies to optimise the benefits for clients and shareholders of the combined group.”
Gilbert has been searching for a merger partner for months as Aberdeen’s business is disproportionately exposed to emerging markets and his company’s funds have been plagued by investor withdrawals.
Aberdeen has a market value of £3.7bn and is almost half the size of Standard Life, which is worth £7.5bn, and rumours that Aberdeen was searching for a deal had spread throughout the London market over the past week, with some traders putting on speculative bets in recent days.
The companies added: “There can be no certainty that any transaction will occur nor as to the terms on which any transaction may occur.”
As the acquiring party, Standard Life has until the close of business on April 1 to formalise its offer to buy Aberdeen under UK takeover rules.
Both Aberdeen and Standard Life Investments focus on actively picking stocks and bonds, an investment style which has come under additional pressure from the rise of cheap index-tracking funds.
Aberdeen has faced significant problems due to its heavy focus on emerging markets, which have been out of favour with investors over the past four years. Last month it recorded its 15th consecutive quarter of net outflows, bringing total redemptions from the FTSE 250 asset manager to more than £100bn since the cycle of withdrawals began.