Fund manager Aberdeen Asset Management (ADN) is buying asset manager Scottish Widows Investment Partnership from Lloyds Banking (LLOY). The acquirer improves 13.1% to 484.6p on news of the deal, which could be worth as much as £660 million. Lloyds rises 1.1% to 76.2p.
The initial £560 million consideration will be satisfied in Aberdeen stock at 420p a share, representing 9.9% of the business. Up to £100 million will be paid in cash in the next five years tied to the performance of the assets.
The deal will add £136 billion in assets to Aberdeen’s funds under management, generating annualised revenues of some £340 million. Post completion, the FTSE 100 fund manager will control some £350 billion of assets. Under the terms of the agreement Aberdeen will manage certain assets for Lloyds.
RBC Capital analyst Peter Lenardos believes the deal will give Aberdeen 'a much stronger UK foothold, access to retail investors and diversification away from emerging market and Asia Pacific equities and into UK equities and fixed income.'
The disposal is part of Lloyds’ strategy to sell its non-core businesses to repair its balance sheet following its disastrous takeover of Bank of Scotland in 2008 as well as to focus on UK high street lending. The UK government owns a third of the bank.
The terms of the deal do not include Scottish Widows, Lloyds’ life, pensions and investment business, which remains core to its operations.
Should the deal secures regulatory approval, it is expected to close in the first quarter of 2014.
The news coincides with a positive update from Aberdeen. Full-year results beat consensus forecasts and include a 39% rise in the dividend. Pre-tax profit increases by the same proportion to £482.7 million.