Sale of insurance business and enhanced long-term strategic partnership with Phoenix Group completes transformation to a fee based capital light investment company
Commenting on the Transaction, Sir Gerry Grimstone, Chairman of Standard Life Aberdeen, said:
“This transaction completes our transformation to a capital light investment business, a process started in 2010 with the sale of Standard Life Bank, continuing with the sale of our Canadian business and the merger last year between Standard Life and Aberdeen Asset Management. This transaction represents excellent value for our shareholders, including a comprehensive and mutually beneficial strategic relationship entered into with Phoenix Group, a longstanding partner of the firm. In addition, I am particularly pleased to note Phoenix Group’s commitment to maintain operational headquarters in Edinburgh.”
Commenting on the Transaction, Martin Gilbert and Keith Skeoch, Co-CEOs of Standard Life Aberdeen, said:
“Today’s announcement represents a logical next step in Standard Life Aberdeen’s journey to build a world-class investment company positioning us strongly for the future and enabling us to meet the evolving needs of our customers and clients. We have a diverse range of modern investment capabilities with global distribution and our leading UK retail platforms are growth engines generating significant net inflows for our asset management business.
“The enhancement of our strategic partnership with Phoenix Group is evidence of our market-leading insurance asset management capabilities. It is also a great opportunity for wider collaboration as the asset manager of choice for Phoenix Group who see further significant consolidation opportunities. With the foundations of a world-class investment company in place we look forward to capitalising on the opportunities that we see ahead of us whilst continuing to deliver for our shareholders.”
Standard Life Aberdeen plc ("Standard Life Aberdeen") today announces the sale of its capital-intensive insurance business to Phoenix Group Holdings ("Phoenix Group") (the "Sale") and an expansion and significant enhancement of their existing long-term strategic partnership (the “Strategic Partnership”, and together with the Sale, the “Transaction”).
The Sale involves the disposal of Standard Life Assurance Limited (“SLAL”), with Standard Life Aberdeen retaining its UK retail platforms and financial advice business (the “Retail Platforms”). The businesses transferring to Phoenix Group as part of the Sale include the UK Mature Retail and Spread/risk books and the Europe, UK Retail and Workplace businesses (the “Disposed Businesses”).
On completion Standard Life Aberdeen will receive total consideration of £3.24bn, comprising cash consideration of £2.28bn and a shareholding of 19.99% in Phoenix Group.
Standard Life Aberdeen and Phoenix Group have agreed to significantly enhance and expand their existing long-term strategic partnership whereby Standard Life Aberdeen continues as Phoenix Group’s long-term asset management partner for the business acquired by Phoenix Group and the existing arrangements between the parties under which Aberdeen Standard Investments manages £48 billion of assets for Phoenix Group have been extended. The Phoenix Group life companies have committed to review the investment management mandates not currently managed by Aberdeen Standard Investments, subject to normal commercial and governance constraints.
Background to and reasons for the Sale
Following the merger of Standard Life and Aberdeen Asset Management in 2017, this Transaction completes the transformation to a fee based capital-light business and is a major step towards the creation of a world-class investment company.
SLAL was founded in 1825 and is one of the UK’s oldest life and pensions businesses. Today it is a leading provider of long-term savings and investment propositions, primarily based in the UK, with operations in Ireland and Germany, and serving around 4.5 million customers and clients.
In recent years, SLAL has focused on investing in its range of modern savings propositions in the workplace and retail savings markets, where it has built leading positions. The successful execution of this strategy has led to growth in Workplace and Retail AUA of 123% over the last five years, while revenues increased by 53%.
While the long-term savings market in the UK is supported by attractive structural growth trends, the Board believes that Standard Life Aberdeen can best capture the benefits of these growth dynamics through Aberdeen Standard Investments and its Retail Platforms. In partnering with Phoenix Group, whose expertise is in administering and servicing long-term savings, Standard Life Aberdeen is able to realise attractive value for the Disposed Businesses, while continuing to benefit from access to related assets and flows.
Key benefits of the Sale
The Transaction is consistent with Standard Life Aberdeen’s strategy to build a world-class investment company:
Post completion over 50% of the enlarged Phoenix Group‘s people will be based in Edinburgh and Phoenix Group has indicated that its long-term intention is to maintain operational headquarters in Edinburgh to benefit from SLAL’s highly experienced management team and depth of talent which it sees as fundamental to the future success of its business
Standard Life Aberdeen following the Transaction
Standard Life Aberdeen will continue to offer its investment solutions to a wide range of institutional, wholesale and retail clients globally, either through its own distribution or through its strategic partners, including Phoenix Group. The business will be better positioned to capitalise on global trends that are shaping the savings and investments landscape. The Transaction enables Standard Life Aberdeen to continue to invest for the future, to meet the needs of customers and clients, and to generate growing and sustainable returns for shareholders.
Following the Transaction, Standard Life Aberdeen will have:
Principal terms of the Sale
The total consideration payable to Standard Life Aberdeen by Phoenix Group in respect of the Sale is £3.24bn. This comprises cash payable on completion of £2.0bn, a dividend to be paid by SLAL to Standard Life Aberdeen of £0.3bn in Q2 2018 and new shares issued at completion representing 19.99% of the then issued share capital of Phoenix Group following the completion of the rights issue undertaken to part finance the acquisition and worth £1.0bn based on Phoenix Group’s share price on 22 February 2018.
The consideration is subject to adjustment in certain circumstances, including if assets or mandates associated with the Phoenix Group and SLAL are withdrawn in certain circumstances prior to the tenth anniversary of the transaction.
The share purchase agreement and related documentation for the Sale contains representations and warranties, covenants, indemnities and undertakings. The conditions for the transaction include:
The share purchase agreement for the Sale provides for a reciprocal break fee payable in certain situations.
It is anticipated that the existing investment management agreements pursuant to which investment management services are provided to SLAL, Phoenix Life Limited and Phoenix Assurance Limited will remain broadly on the same terms as the existing arrangements and will each be for a rolling three year term.
Under the terms of a new relationship agreement, Standard Life Aberdeen will have rights to two board seats as long as its shareholding is above 15% and one board seat above 10%. The shareholding is subject to a lock-up of 12 months from completion.
Standard Life Aberdeen views its shareholding in Phoenix Group as a core component of its long-term partnership with Phoenix Group. The Strategic Partnership rests on the complementary strengths of each company: Phoenix Group as an administrator of long-term savings and Standard Life Aberdeen as a provider of investment solutions. It is underpinned by mutually beneficial commercial nature of the relationship, the long-term agreements entered into as part of the Transaction and Standard Life Aberdeen’s shareholding in Phoenix Group.
Additionally, through its shareholding, Standard Life Aberdeen will share in the benefits of the combination of SLAL and Phoenix Group’s businesses and in the future growth of Phoenix Group.
Should the transaction not complete before the record date of the Phoenix Group interim dividend for the financial year 2018, Standard Life Aberdeen will be entitled to receive a payment equal to the amount which would have been received as part of the Phoenix Group interim dividend had the transaction completed before this date.
The Sale constitutes a Class 1 transaction for the purpose of the Listing Rules and is conditional upon the approval of Standard Life Aberdeen’s shareholders at a General Meeting.
The Sale is expected to complete in the third quarter of 2018 and is also conditional upon relevant regulatory approvals, including from the Prudential Regulatory Authority (“PRA”) and the Financial Conduct Authority (“FCA”).
Information on the Disposed Businesses
SLAL is a leading provider of long-term savings and investment propositions, based in the UK, with operations in Ireland and Germany, serving around 4.5 million customers and clients. The businesses transferring to Phoenix Group as part of the Sale comprise:
Summary financial information with respect to the Disposed Businesses is set out below:
Fee based revenue 796
Spread/risk margin 165
Total adjusted operating income 961
Total adjusted operating expenses (457)
Investment management fees to ASI (125)
Adjusted operating profit 379
Capital management 2
Adjusted profit before tax 381
Adjusted profit before tax 381
Total assets under administration (£bn) 159
Aberdeen Standard Investments will continue to manage £110.5bn of AUM on behalf of the Disposed Businesses, while Phoenix Group will continue to provide and administer insurance products to Standard Life Aberdeen’s Retail Platforms representing £24.5bn AUA comprising largely SIPPs and offshore bonds.
Information on the retained Retail Platforms
The following elements of the UK Pensions and Savings business will be retained by Standard Life Aberdeen:
Standard Life Aberdeen’s retained Retail Platforms, together with Parmenion, are the largest provider of adviser platforms in the UK with £58bn of assets serving over 3,000 adviser firms and providing access to the full range of Aberdeen Standard Investments’ investment capabilities. The UK Retail Platforms have grown AUA by 353% over the last five years, generating net flows of £24.6bn at an annualised rate of 35%.
Standard Life Aberdeen continues to grow its 1825 financial advice business, which offers a full financial planning and personal tax advice service. Offering a wide range of investment options, supported by investment experts and technology, clients are able to access support how and when they need it. Standard Life Aberdeen has acquired four adviser firms to date, broadening its reach across the country and bringing total assets under advice in 1825 up to £3.6bn.
1. Inclusive of a £312m dividend payable from Disposed Businesses to Standard Life Aberdeen pre-completion.
2. Excludes SLAL AUM of £18.3bn included in growth channels.
Standard Life Aberdeen
James Thorneley, Head of Communications, +44 (0) 20 7463 6323
Aberdeen Standard Investments +44 (0) 7768 556 334
Katy Hetherington, PR Manager, +44 (0) 131 245 2283
Standard Life Aberdeen +44 (0) 7841 344 374
Jakub Rosochowski, Investor Relations Director, +44 (0) 131 245 8028
Standard Life Aberdeen +44 (0) 7515 298 608
Neil Longair, Investor Relations Manager, +44 (0) 131 245 6466
Standard Life Aberdeen +44 (0) 7711 357 595
J.P. Morgan Cazenove (Joint Financial Adviser and Joint Corporate Broker)
+44 (0) 20 7742 4000
Fenchurch Advisory Partners (Joint Financial Adviser)
+44 (0) 20 7382 2222
Goldman Sachs (Joint Corporate Broker)
+44 (0) 20 7774 1000
Cenkos Securities (Joint Corporate Broker)
+44 (0) 20 7397 8900
Tulchan Communications (Communications Adviser to Standard Life Aberdeen)
+44 (0) 20 7353 4200