Standard Life and Aberdeen agree on terms for merger

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The move will create one of the UK's largest fund managers, overseeing assets worth £660bn.

LONDON, March 6 Standard Life and Aberdeen set out the terms of their proposed 11 billion pound ($13.51 billion) merger on Monday, saying they expected the deal to save the combined companies up to 200 million pounds in costs.

Standard Life and Aberdeen Asset Management collectively employ more than 9,000 people but its unclear how any deal might affect the workforce.

Martin Gilbert, the 62-year-old chief executive and founder of Aberdeen, is a friend of former Scottish first minister Alex Salmond and the fund house is a substantial sponsor of sporting events such as golf's Scottish Open.

"This merger brings financial strength, diversity of customer base and global reach to ensure that the enlarged business can compete effectively on the global stage", added Aberdeen Chief Executive Martin Gilbert.

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.

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The Standard Life head said the ideology behind the merger was not directly linked to the rise of passive investment hampering active managers.

If Aberdeen and Standard Life complete their merger, Lloyds Banking Group - a 10% shareholder in Aberdeen - will hold a small stake in the combined group. Active managers have struggled to achieve this since the financial crisis, leading investors to pull money out of their funds. He said Standard Life's equity teams, who specialise in developed markets, would sit well with Aberdeen's emerging markets and Asia expertise to create "a really good global equities franchise".

Wilson also believes cost savings should be easy to deliver as back office systems can be merged and job losses seem certain.

With weak USA stock and bond returns in the 2000s and early 2010s, traditional "active" stock- and bond-pickers like the ones at Aberdeen and Standard Life have in recent years faced tough competition from low-fee, autopiloted index funds sold by Vanguard, BlackRock, Barclays, Fidelity and a growing list of rivals.

It said any potential merger represents an excellent opportunity to leverage the companies' strengths to create "a world class investment company". Until more news becomes available, investors would be wise to stay patient, the analyst said.