Standard Life Aberdeen on Friday confirmed the sale of its “capital-intensive” insurance business to Phoenix Group for a total consideration of £3.24 billion including £2.28 billion in cash and a 19.99% shareholding in Phoenix Group.
Standard Life Aberdeen chairman Gerry Grimstone said: “This transaction completes our transformation to a capital light investment business, a process started in 2010 with the sale of Standard Life Bank, continuing with the sale of our Canadian business and the merger last year between Standard Life and Aberdeen Asset Management.
“This transaction represents excellent value for our shareholders, including a comprehensive and mutually beneficial strategic relationship entered into with Phoenix Group, a longstanding partner of the firm.
“In addition, I am particularly pleased to note Phoenix Group’s commitment to maintain operational headquarters in Edinburgh.”
Martin Gilbert and Keith Skeoch, co-CEOs of Standard Life Aberdeen, said: “Today’s announcement represents a logical next step in Standard Life Aberdeen’s journey to build a world-class investment company …
“The enhancement of our strategic partnership with Phoenix Group is evidence of our market-leading insurance asset management capabilities.
“It is also a great opportunity for wider collaboration as the asset manager of choice for Phoenix Group who see further significant consolidation opportunities.”
Standard Life Aberdeen also announced its annual results in which it said its total assets under management and administration rose 1% to £654.9 billion in 2017.
Further, Standard Life Aberdeen said chairman Gerry Grimstone has informed the company’s board that he intends to stand down by the end of 2019.
On the firm’s results, Gilbert and Skeoch added: “With today’s news of the proposed sale of the capital-intensive insurance business and an enhanced long-term strategic partnership with Phoenix Group, Standard Life Aberdeen has completed its transformation to a fee based capital-light investment company.
“Over the past year, as our teams come together with a sense of energy and purpose, we have continued to deliver for our clients, growing assets, revenues and dividends.
“At the same time, the merger integration is progressing well and we are now targeting at least £250m of annualised cost synergies.
“While market conditions remain tough, particularly within the institutional channel, the momentum in our business is good demonstrated by the £80 billion of gross inflows attracted during the year.
“Although we have seen net outflows, these have reduced year on year and continue to improve as our investment and distribution teams begin to leverage the full breadth of our capabilities, global reach and scale.
“We continue to innovate, launching 22 new funds during the year with strong backing from clients and while the recent decision by Lloyds Banking Group to review their long-term asset management arrangements is disappointing, we are winning new mandates across a wide range of investment strategies.
“Meanwhile, our adviser platforms, which are not subject to the proposed sale, have attracted record flows demonstrating the diversity of our business and our leading position in a fast growing market.”
Phoenix chief executive Clive Bannister said as Standard Life Aberdeen generates more assets, his company would be able to administer them, creating an “alignment of interest” that would helped both companies.
“Some deals make you bigger, some better … this does both,” he told journalists on a conference call.