Aberdeen Asset Management is to become Europe’s biggest independent fund manager after striking a deal worth up to £660 million with Lloyds Banking Group.
The takeover of Scottish Widows Investment Partnership will result in Lloyds holding a 9.9% stake in Aberdeen while the two companies will also form a long-term strategic partnership.
Aberdeen manages around £200 billion of funds and is set to add another £136 billion once the acquisition of Edinburgh-based SWIP completes early next year.
Aberdeen fought off competition from other possible bidders, including Australian investment bank Macquarie, to secure a deal that will see it overtake Schroders as Europe’s biggest investment house. Its shares jumped by more than 10% today.
Lloyds has been holding a six-month auction for SWIP - part of the bank’s Scottish Widows insurance arm - as it sells off assets to shore up its balance sheet and focus on its UK retail and commercial banking businesses.
The group, which is 32% owned by the taxpayer, will continue to own Scottish Widows, the group’s life, pensions and investment business.
The agreement will see a broad range of Aberdeen’s investment funds sold through 1,300 Lloyds branches.
It is the latest step in the transformation of Lloyds under chief executive Antonio Horta-Osorio.
He will qualify for a long-term bonus worth £2.3 million this week if shares in the banking group hold steady. The boss of the state-backed banking group will receive just over three million shares should the stock close above 73.6p tomorrow.
Mr Horta-Osorio will not be able to sell them until 2018 under the incentive scheme.
They were 75.6p today, at which price the bonus would have a paper value of around £2.3 million.
The acquisition is worth an initial £550 million met by the issue of 131.8 million new Aberdeen shares to Lloyds, equivalent to a 9.9% stake in the group.
There will also be a performance-related five year payment of up to £100 million dependent on growth delivered by the strategic relationship.