Standard Life Agrees to Buy Aberdeen in $4.7 Billion Stock Deal

Standard Life Agrees to Buy Aberdeen in $4.7 Billion Stock Deal

The combined Aberdeen and Standard Life will be run jointly by Martin Gilbert and Keith Skeoch, the chief executives of Aberdeen and Standard Life respectively.

The Times meanwhile reported this morning that 1,000 jobs could be at risk as a result of the merger, prompting the Scottish government and local MPs to demand urgent clarity from both sides.

Under the terms of the deal Standard Life will pay Aberdeen shareholders 0.757 new Standard Life ordinary shares for each Aberdeen ordinary share.

"Under the terms of the potential merger, Aberdeen shareholders would own 33.3% and Standard Life shareholders would own 66.7% of the combined group".

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Aberdeen has a market value of £3.7bn, roughly half the size of the overall Standard Life business. I'm still optimistic about the prospects for Aviva following its merger with Friends Life, while I think Standard Chartered and HSBC could register improved investment performance as their strategies take effect.

The transaction "has a compelling strategic and financial rationale through combining Standard Life's and Aberdeen's complementary strengths to create a world class investment group".

The merger is subject to share holder approval and additional conditions.

Two of Britain's biggest fund managers have been exploring an £11bn merger that would create a global powerhouse overseeing more than £600bn-worth of assets. Standard Life's shares were up 5.7 per cent to more than 400p. Yet embattled Aberdeen boss Martin Gilbert has also done better than might have been expected.

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Rebecca O'Keeffe, head of investment at our sister website Interactive Investor, explains: "The move by Standard Life to buy Aberdeen is a major attempt to try to build their defences as the active management industry comes under increasing pressure from lower-cost passive managers".

In my view, the merger could be good news for investors in Standard Life and Aberdeen Asset Management.

Aberdeen has seen fund outflows accelerate amid deteriorating investor sentiment towards emerging markets, the company's stronghold.

With weak US 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. The deal is due to complete in the third quarter of 2017.

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