Standard Life plc — formerly called Phoenix Group — said on Wednesday it has agreed to buy Edinburgh-based Aegon UK for £2 billion.
Aegon UK contains the UK insurance and pensions operations of Aegon Europe Holding B.V.
Standard Life said the deal adds £160 billion of assets under administration (AUA) and 3.8 million customers to Standard Life, creating an enlarged group with £480 billion of AUA and 16 million customers, establishing Standard Life “as the UK’s largest retirement savings and income business.”
Standard Life called the deal a “strategically and financially compelling transaction.”
The transaction will be funded through a combination of debt, cash and the issue of new ordinary shares in Standard Life — about 15.3% of the group’s enlarged share capital — to Aegon on completion.
Aegon will become a “new strategic shareholder and asset management partner” of Standard Life.
Standard Life said the £2 billion will be financed through a cash consideration of £750 million, financed through a combination of £650 million debt issuance and cash resources, and the issuance to Aegon of 181.1 million newly issued shares in Standard Life.
The relationship agreement with Aegon entitles Aegon to appoint a non-executive director to the Standard Life board “and underpins the strategic asset management partnership between Aegon and Standard Life.”
Phoenix acquired the Standard Life brand in 2021 from Aberdeen, which retains a roughly 10.7% stake in Standard Life plc.
Standard Life said: “Standard Life’s existing strategic shareholders, MS&AD Insurance Group Holdings, Inc and Aberdeen Group Plc are supportive of the strategy and remain committed to their shareholdings. The potential for significant value creation of the enlarged group is attractive for them, and we look forward to continuing the development of our already close association with both.”
Standard Life CEO Andy Briggs said: “Our agreement to acquire Aegon UK significantly accelerates our vision to be the UK’s leading retirement savings and income business.
“We will be in an even stronger position to meet the evolving needs of our 16 million customers with enhanced digital, advice and distribution capabilities across Workplace and Retail, strengthening our standing in one of the world’s most attractive markets.
“Furthermore, the transaction accelerates our shift to capital-light whilst strengthening our cash, capital and earnings position to create increased value for shareholders. With financial wellbeing at the heart of everything it does, Aegon UK’s values and culture are aligned with our own.
“Together, we will not only be stronger, we will be better – helping our customers achieve better outcomes and greater financial security in later life. I look forward to welcoming everyone at Aegon UK to Standard Life in due course and working together to capture the huge potential in front of us.”
Aegon CEO Lard Friese said: “Standard Life is the right owner for Aegon UK: we share the same values and a strong commitment to customers, and together the businesses will create the UK’s largest retirement savings and income provider.
“The businesses are complementary and the combination offers an excellent outcome for Aegon UK’s customers and colleagues. Aegon’s shareholding will provide an opportunity to participate in the future success of the enlarged group.”
Standard Life said the deal delivers “total net synergy value of £0.8bn, comprised of £110m of run-rate pre-tax cost synergies and c. £340m of one-off capital synergies, underpinned by Standard Life’s experience in large and complex life insurance integrations.”
It said the deal establishes Standard Life as the UK’s second largest workplace pensions platform by assets “adding £74bn AUA and 2.1m customers to the existing £71bn Workplace offering” and transforms Standard Life “from a smaller retail provider to the UK’s second largest retail pensions and savings platform by assets; adding £86bn AUA and 1.8m customers.”
Standard Life said the deal is expected to increase group operating cash generation by £160 million per annum and IFRS adjusted operating profit by approximately £190 million per annum, and to deliver £400 million of additional excess cash over the five years following completion, increasing financial flexibility.