Aberdeen Asset Management has become Europe’s largest listed stand-alone investment firm after the group announced a deal to buy Scottish Widows Investment Partnership (SWIP) from Lloyds Bank this week.
The deal – announced through Aberdeen’s investor relations website on Monday morning – is described as a ‘definitive agreement to form a long-term strategic relationship’ between Lloyds and the investment bank.
In a transaction worth £650 mn ($966 mn) in total, Aberdeen is paying Lloyds £550 mn in equity, giving the government-backed lender a 9.9 percent stake in Aberdeen. Should the partnership prove successful, Lloyds will receive up to £100 mn as a performance-related cash payment after five years.
The acquisition means Aberdeen overtakes Schroders as the largest listed investment bank in Europe, with its assets under management (AUM) increasing from about £200 bn to £336 bn. Aberdeen also estimates that the new assets will bring with them annualized revenues of £234 mn.
A breakdown of SWIP’s current assets. Source: Aberdeen investor presentation
Martin Gilbert, Aberdeen’s CEO, says he is ‘delighted’ to welcome Lloyds as a major shareholder and describes the transaction as ‘significant’ for Aberdeen’s future prospects.
‘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 introduces a strategic relationship with Lloyds Banking Group,’ Gilbert adds. ‘We are confident this transaction will deliver considerable additional value to our expanded client base and will therefore benefit our shareholders.’
In the same release, Aberdeen identifies the need to identify a ‘house view’ when it comes to future investments shared between the two entities, including when selecting individual fund managers and constructing portfolios. A diversified profile of businesses and the complementary nature of the two firms’ products are also picked out as highlights of the pending relationship.
The firm’s IR department chose to support news of the acquisition with the release of Aberdeen’s annual results, correct up to September 30, 2013. A 24 percent surge in net revenue to £1.07 bn means Aberdeen enjoyed boosted pre-tax profits of £482.7 mn in the first three quarters of the year, beating 2012’s total by 39 percent. Investors will enjoy a similarly hearty dividend of 16p per share.
Buoyed by the news, Gilbert describes the numbers as ‘testament to the breadth and scale of Aberdeen’ and the firm’s continuing focus on long-term opportunities and return for its clients.
He remains cautious, however, and warns of difficulties on the investment horizon.
‘While there are encouraging signs of recovery in certain economies around the world, including the UK, the investment environment is likely to remain difficult as structural imbalances remain unresolved,’ he explains. ‘Against this backdrop our fund management teams will continue to focus on fundamental research to identify opportunities for our clients.’
