Coverage: Scottish money managers to combine for $13.5 billion

Standard Life Plc could announce an offer to acquire Aberdeen Asset Management Plc as early as Monday morning for $13.5 billion, continuing a consolidation move in the money management business.

Chris Newlands, Madison Marriage and Oliver Ralph of the Financial Times had the news:

The two companies, which worked over the weekend to finalise the terms of the deal, would become Europe’s second-largest fund manager with £660bn of assets.

The deal would complete the transformation of Standard Life’s business from a traditional insurer into an investment powerhouse able to challenge global fund management groups.

Discussions continued on Sunday over what to call the new company, which would be based in Edinburgh. People close to the talks said Standard Aberdeen had emerged as a frontrunner — a symbolic move to airbrush the Life name that would highlight the 146-year-old insurer’s push into asset management.

Sir Gerry Grimstone, chairman of Edinburgh-based Standard Life, first discussed a potential deal with Aberdeen chief executive Martin Gilbert seven years ago. Those discussions accelerated last August as the introduction of cheaper passive funds that track an index started to hit both businesses’ actively managed portfolios.

Sarah Jones of Bloomberg News reports that combined the two companies would manage $811 billion:

Standard Life is known for its multi-asset strategies, including its flagship GARS fund that manages about 25.1 billion pounds, while Aberdeen is seen as an emerging-market specialist, with about a quarter of its assets invested in the region. Both companies have suffered outflows from those strategies.

Both Gilbert and Standard Life’s CEO Keith Skeoch have said they wanted to grow in the U.S., where most of the world’s assets are managed, as part of efforts to become more global. Standard Life Investments, which has a partnership with John Hancock, currently sells nine products to U.S. investors and oversees about 12.5 billion pounds of assets there.

The potential combination between the two Scottish firms could achieve annual cost savings of 200 million pounds, Sky News reported, without saying where it got the information. Standard Life, based in Edinburgh, employs around 8,335 people and the Aberdeen, Scotland-based asset manager has more than 2,800 workers.

Talks are ongoing and “the potential merger represents an excellent opportunity to leverage Standard Life and Aberdeen’s combined strengths,” according to the firms. The combined company would have a market value of about 11 billion pounds and see Skeoch and Gilbert become co-CEOs and Standard Life’s Gerry Grimstone would become chairman.

Alistair Smout and Simon Jessop of Reuters report that Standard Life is twice the size of Aberdeen:

Standard Life is roughly twice the size of Aberdeen at 7.5 billion pounds and historically famous for selling insurance, tracing its roots back to the 19th century, while Aberdeen is one of Europe’s largest listed fund firms.

In recent years Standard Life has built up its Standard Life Investments asset management arm. SLI and Aberdeen now manage broadly similar amounts across stocks, bonds and other assets, and together they would manage assets of about 660 billion pounds for a range of retail and institutional clients.

That is more than double those of Henderson Group and Janus Capital Group, which last year agreed their own $6 billion all-share merger, as well as Schroders, currently Britain’s biggest listed asset manager with nearly 400 billion pounds in assets.

The firms, which both have a large presence in Edinburgh as well as offices and sales teams across the world, said without elaborating that they saw “significant synergy potential”, raising the prospect of job losses among their nearly 10,000 workers.