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We can share power, Aberdeen and Standard Life bosses insist

07 March, 2017, 00:22 | Author: Paula Vaughn
  • Aberdeen Asset Management and Standard Life confirm £11bn merger

The confirmation of a possible merger follows an earlier report by Sky News.

After completion of the merger, Standard Life shareholders will own 66.7 percent of the group, while Aberdeen AM's shareholders will own approximately 33.3 percent.

Standard Life Investments contributed £200m more in capital than it required in solvency capital under Solvency II.

Mr Skeoch added: "The combination of our businesses will create a formidable player in the active asset management industry globally".

Inevitably there will be some fund consolidation, with fund mergers or even fund closures taking place in order to cut costs in areas of commonality.

Aberdeen's shareholders will own a third of the combined entity while Standard Life shareholders will own the remaining two-thirds of the group, which will become the second-largest asset manager in Europe.

The deal comes as asset managers, which charge higher fees to make active investment decisions, face growing competition from low-priced index-tracking rivals and rising regulatory costs.

While Vanguard Group of Malvern is the largest and best-known Philadelphia-area investment company, with around $4 trillion in indexed bond and stock funds and other customer assets, Aberdeen's $65 billion US operation "is the largest traditional active manager based in Philadelphia", an early center of the USA investment business, said Jonathan M. Heckscher, senior vice president at Pennsylvania Trust Co.in Radnor.

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"Aberdeen has been struggling of late", said Laith Khalaf, a senior analyst at Hargreaves Lansdown Plc.

It also represents another major landmark for Edinburgh's Standard Life which ended mutual ownership in 2006 and now has around 1.2 million shareholders. The insurer, which has sold off insurance assets to focus on asset management, has a market value of £7.5 billion.

But there are no guarantees.

The combined business is to have a stock market capitalization of £1 billion and oversee assets worth £60 billion - making it one of the largest investment managers in the world and the biggest in Britain.

"The regulator should investigate to determine whether some form of price collusion, whether formally or informally, is being undertaken by major fund groups", says Miller.

"Underperformance of Aberdeen's Global and APAC equity strategies remains a concern, and we continue to see an increasingly competitive environment for active managers, including in the EM space, with more passive strategy alternatives now available to investors".

"By combining, asset managers often look to rip out redundant costs and also fire underperforming managers", the paper adds.

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