Standard Life announces £3.8 billion acquisition

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Scottish financial giants Standard Life and Aberdeen Asset Management will continue to keep their joint headquarters in Scotland after a merger, it was pledged today, as the firms confirmed they have agreed terms on a £11billion deal.

Standard Life said in a statement on Monday morning that both groups would recommend an all-share deal to shareholders worth around £11 billion.

They wrote: "If this merger is successful, we would see it as a spring board, from a position of enhanced strength, to embark on further deals, possibly U.S.".

For Standard Life the deal would considerably bulk up its fund management operations as it tries to shift itself away from a pure life insurer to more of a fund manager.

Once the merger is completed Aberdeen's shareholders will own 33.3% of the combined group, while Standard Life's shareholders will have a stake of 66.7%.

Following the merger, Sir Gerry Grimstone, current chairman at Standard Life, would become chairman of the board of the combined group, and Simon Troughton, chairman at Aberdeen Asset Managament, would be deputy chairman. Keith Skeoch, chief executive of Standard Life, and Martin Gilbert of Aberdeen, will be co-chief executives.

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Martin Gilbert, the 62-year-old chief executive and founder of Aberdeen, is a friend of former Scottish first minister Alex Salmond and the fund house is a substantial sponsor of sporting events such as golf's Scottish Open.

This reflects the fact that Standard Life is bigger than Aberdeen, with a market capitalisation of £7.5 billion.

'The combination of our businesses will create a formidable player in the active asset management industry globally, ' Skeoch told the media.

"The explosive growth in passive investing trends has heaped pressure on active managers like Aberdeen and Standard Life and consolidation had to be on the cards".

The companies said they are expecting to make around £200 million of annual cost savings from the deal.

Standard Life, meanwhile, reported a £4.3bn net outflow from its flagship Global Absolute Return Strategies fund during 2016, while overall net inflows for its fund management business fell from £3.3bn in 2015 to £1.1bn. Other terms of the proposed deal were still being discussed, they said, suggesting much work still needs to be done before any formal offer can be made to both firms and their shareholders. Until more news becomes available, investors would be wise to stay patient, the analyst said.