UPDATE 2 — Standard Life Aberdeen said on Tuesday it plans to return up to £1.75 billion to shareholders once it closes the sale of its UK and European insurance business to Phoenix Group.
£1.75 billion is more than 15% of the market capitalisation of the Edinburgh-based fund management giant.
In February, Standard Life Aberdeen 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.
Ahead of its annual general meeting later on Tuesday, Standard Life Aberdeen said £1 billion is expected to be returned to its shareholders via the issue of new B shares which Standard Life Aberdeen will subsequently redeem for cash.
“Following completion of the proposed B share scheme and share consolidation, SLA proposes to return up to a further £750 million to shareholders by way of a share buyback programme …” said the firm.
“The balance of proceeds from the proposed transaction, combined with existing liquidity within the SLA Group, will be used to retire a proportion of SLA’s outstanding debt of £1.9 billion and support investment and other general corporate purposes.
“It is intended that SLA will undertake an exercise to retire its outstanding tier 1 bonds, while continuing to evaluate options in relation to the outstanding tier 2 instruments, with a focus on maximising the efficiency of its capital and liquidity.”
Speaking ahead of the AGM, Standard Life Aberdeen chairman Gerry Grimstone said: “The last year has been a period of significant change for Standard Life Aberdeen with the proposed sale of the UK and European insurance businesses completing our transformation to a capital light investment company.
“We are continuing to focus on harnessing the breadth and depth in our investment capabilities to deliver cost effective solutions to meet the needs of our clients and customers across multiple channels and geographies.
“The cash generated from the sale will enable us to continue to invest in the development of our business and also to return surplus capital to shareholders.
“Our proposal to return up to £1.75bn by way of a B share scheme and share buybacks represents over 15% of our market capitalisation at close of business on 25 May 2018, and would extend our long-running track record of returning surplus cash to shareholders.“