Standard Life and Aberdeen Asset Management shares soar on merger

(c) Sky News 2017: <a href="http://news.sky.com/story/standard-life-and-aberdeen-asset-management-shares-soar-on-merger-10792281">Standard Life and Aberdeen Asset Management shares soar on merger</a>
 

Shares (Berlin: DI6.BE - news) in Standard Life (LSE: SL.L - news) and Aberdeen Asset Management (Frankfurt: 899502 - news) have risen sharply following confirmation of a preliminary deal on a £11bn merger.

It was the first opportunity investors had to react to news of the tie-up - confirmed by the companies on Saturday (Shenzhen: 002291.SZ - news) following a story by Sky News .

Standard Life stock was up by as much as 9% when the FTSE 100 opened on Monday. Some of those gains were later eroded and it was 6% higher at the close. Aberdeen's shares were 4% up.

Further details were given on the agreement, which would create Britain's biggest fund manager with assets worth £660bn, before shares began trading.

These mainly concerned confirmation of projected cost savings of up to £200m, a figure which could herald the possibility of job losses among the companies' collective workforce of over 10,000 people.

Under the terms, Aberdeen shareholders would own a third of the new enlarged company's stock.

Its chief executive, Martin Gilbert, will be co-chief executive alongside Standard Life's Keith Skeoch, while the latter company's chairman, Sir Gerry Grimstone, will maintain the role for the combined company, which is yet to be named.

Mr Skeoch said of the deal on Monday: "We strongly believe that we can build on the strength of the existing Standard Life business by combining with Aberdeen to create one of the largest active investment managers in the world and deliver significant value for all of our stakeholders."

The deal, which remains subject to conditions including shareholder approvals, is being recommended to investors of both firms.

Both Aberdeen and Standard Life, which actively manages about £270bn globally, have had difficult recent periods to weather.

Aberdeen has seen funds under management decline amid deteriorating investor sentiment towards emerging markets, the company's stronghold.

It has reported 15 consecutive quarters of net withdrawals, and now manages just over £300bn of assets - down from more than £400bn at the peak.

Standard Life, meanwhile, has been struggling to improve the performance of GARS, a so-called absolute return fund which aims to make money for investors in all market conditions.

GARS, which stands for Global Absolute Return Strategies, produced a negative return in 2016 even as the FTSE-100 index soared.

Keith Baird, financial services analyst at Cantor Fitzgerald, said of the deal: " Given the headwinds faced by the asset management industry from passive investing, pricing and regulatory pressures, this looks like a defensive deal.

"Both firms have issues which have been reflected in their share prices," he said but added: "The fit between the two businesses looks reasonably complementary but there will be a risk of revenue and staff attrition to offset savings on costs."

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