Insurer and wealth manager Standard Life (SL.) got on the right side of investors as it unveiled the £2.2 billion sale of its Canadian business. That, according to the group, represents a £1.2 billion one-off windfall.
But perhaps more importantly for investors, the sale of the savings, insurance and investment management business, to local firm Manulife Financial (MFC:NYSE), will mean Standard Life handing back £1.75 billion in cash to shareholders.
That cash return equates to approximately 73p per share, or a rough 19% yield based on the share price before today's near-7.5% hike to 414.6p. The deal is due to complete early next year.
The sale is part of Standard Life’s strategy of simplifying its growing global investment business. A running Shares Play of the Week, the group intends to lower costs and boost revenues by focusing on fee-based investment management and savings.
Standard Life’s interests in Canada will not end when the deal completes. Manulife will sell the FTSE 100 firm’s products in the country, as well as in the US and Asia.
The agreement has moved Standard Life further away from volatile earnings and capital heavy insurance to a more ‘capital lite’ wealth manager, according to analysts at Oriel Securities. ‘With lower capital constraints, the remaining business should be able to achieve a higher growth profile.’