Standard Life and Aberdeen Asset Management revealed details of their £3.8 billion (€4.4 billion) deal this morning, which sees two of Scotland’s best known investment houses merge.
The firms confirmed the all-share deal that will make the combined entity become Europe’s second largest asset manager.
Business diversification is the likely cause of the deal as both firms have seen their share prices drop since May 2015 – until today’s confirmation sent Aberdeen’s stock 5% higher and Standard Life’s 7% higher.
The combined company will be worth £11 billion and will have £660 billion in assets under management, making it the biggest asset manager in the UK and second only to Amundi in Europe.
Aberdeen chief executive Martin Gilbert said cost savings could amount to approximately £200 million and told the BBC there would be “some job cuts”.
Investment bank Cantor Fitzgerald said diversification was the likely rationale for the deal. Both firms have struggled in recent times, with Standard Life’s share price down 24% since reaching its peak in May 2015, while Aberdeen has seen heavy losses due to emerging market redemptions. Its share price dropped by 44% in the same time period.
While the phrase ‘a merger of equals’ was used to describe Henderson Global Investors tie-up with Janus Capital last year, in this deal Standard Life would have two-thirds and Aberdeen one-third of the group by value.
However, management control is to be split equally between Aberdeen’s Gilbert and Keith Skeoch from Standard Life, who will be co-chief executives of the new group.
“The combination of our businesses will create a formidable player in the active asset management industry globally,” said Skeoch in a statement.
According to a regulatory announcement posted on the stock exchange this morning, the firms will incorporate both their names in the re-brand. Some think that Standard Aberdeen is the most likely.
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