Aberdeen, Standard Life jump after announcing US$4.7 billion deal

LONDON (BLOOMBERG) - Standard Life jumped the most in more than two years after Scotland's largest insurer agreed to buy Aberdeen Asset Management, creating a fund manager that oversees 660 billion pounds (S$1.143 trillion). Aberdeen's shares also climbed.

Standard Life rose as much as 9.6 per cent in London trading, the most since September 2014, and was up 7.3 per cent at 406 pence as of 9:07 a.m. Aberdeen gained as much as 8.2 per cent, the most since June, and was up 5.7 per cent at 302 pence.

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 developing economies. Both companies have suffered outflows from those strategies as active managers that specialize in stock and bond picking have been losing market share to lower-fee indexers in recent years.

The deal "is a highly defensive transaction in response to the progress of 'machines,' namely the passive investment industry, as both companies attempt to face down the threats from the growing scale and much lower cost base of the 'machines'," Shore Capital Group analyst Eamonn Flanagan wrote in a note to investors.

"We highlight the oddity of a board comprising equal number of representatives, despite one company being twice the size of the other."

Standard Life shareholders will own 66.7 per cent of the combined group, the companies said in a joint statement on Monday.

Aberdeen's investors will receive 0.757 of a new Standard Life ordinary share for each Aberdeen share they own. That values Aberdeen in line with Friday's market value of 3.77 billion pounds, according to Bloomberg calculations.

Standard Life, based in Edinburgh, employs around 8,335 people and the Aberdeen, Scotland-based asset manager had more than 2,800 workers in September.