Taxpayers could end up with a stake in Aberdeen Asset Management after the firm confirmed it is in talks to buy Scottish Widows Investment Partnership from Lloyds Banking Group.
The firm, led by chief executive Martin Gilbert, said the acquisition would be funded by handing new shares in Aberdeen to Lloyds, which is 33% owned by the taxpayer.
The deal – which would see the fund manager form a strategic partnership with the bank – would also involve additional deferred cash payments, conditional on the business’s performance over a period of years.
Buying Scottish Widows, which is worth £500million and manages more than £140billion on behalf of investors, would give Aberdeen assets of close to £350billion, making it the largest listed fund manager in Europe.
“We can confirm we are in discussions with Lloyds Banking Group in relation to a possible acquisition of Scottish Widows Investment Partnership and the formation of a strategic partnership with Lloyds,” the firm said yesterday.
“The potential acquisition would add further scale and diversity to the company’s product range, thus complementing organic growth, consistent with the board’s strategy.
“If agreed, the acquisition would be funded through the issuance of new shares in the company to Lloyds and additional deferred payments in cash, conditional on the performance of the partnership over a period of years.
“The proposed transaction would also offer substantial cost efficiencies and synergies. The company would expect any transaction agreed to be materially earnings per share enhancing. It would also reinforce the company’s commitment to a progressive dividend policy and to return surplus capital to shareholders over time.
“There can be no certainty that the discussions will lead to any transaction or any certainty as to the terms on which any such transaction might proceed. Further statements will be made if and when appropriate.”
Aberdeen’s share price shot up after the announcement.
It would issue new shares to Lloyds if its offer is successful, and the fund manager’s market capitalisation of just over £5billion would therefore mean that Lloyds could potentially hold a stake of up to 10% in Aberdeen, according to reports.
Aberdeen has undertaken acquisitions using its shares as currency before, notably when it acquired the asset management arm of Credit Suisse, the Swiss banking group, in 2008.
That deal resulted in Credit Suisse owning roughly 25% of Aberdeen, a shareholding that it has now offloaded.
Lloyds is selling non-core assets to meet regulatory demands to raise more capital. Industry sources said Aberdeen is not the only party interested in Scottish Widows and the bank expects to make a decision on a preferred bidder by the end of the year.
Lloyds declined to comment yesterday.