Aberdeen buys Scottish Widows from Lloyds for $1bn

Aberdeen Asset Management bought Lloyds’ fund management arm Scottish Widows for about £660 million ($1.1 billion) yesterday, making it Europe’s No. 1 listed stand-alone fund manager.

Aberdeen will pay with shares worth about £560 million , or 9.9 per cent of the company, Lloyds said, and assets under management will rise to £336 billion from £200 billion. Lloyds has agreed a one-year lock-up on the shareholding.

It will also pay £100 million in cash over five years depending on how well Aberdeen manages various Lloyds assets.

Aberdeen shares rose more than 13 per cent.

Analysts at Numis said the deal looked well priced for Aberdeen but they want to “seek clarity” on how much of Scottish Widow’s assets will stay put and on the lock-up.

For Lloyds, the deal lifts its Core Tier 1 capital by 11 basis points from the 9.9 per cent reached in the third quarter to a 10-per cent target set by Britain’s financial watchdog. Lloyds shares rose 0.9 per cent.

“We are confident that this transaction will deliver considerable additional value to our expanded client base and this will therefore benefit our shareholders. I am delighted to welcome Lloyds as a major shareholder,” Aberdeen chief executive Martin Gilbert said in a statement.

Led by Gilbert, Aberdeen has enjoyed a sharp rise in its assets since the financial crisis, buoyed by demand for its global emerging market equities funds and a flurry of acquisitions. Adding Scottish Widow’s strength in fixed-income will provide diversification to its equities business.

Lloyds, which is 33 per cent state owned, is selling off non-core assets to strengthen its balance sheet and focus on lending to British households and businesses. It needs to plug an £8.6 billion pound shortfall identified by Britain’s financial regulator in June to persuade the regulator to let it start paying dividends again next year. – (Reuters)