Standard Life Aberdeen will return as much as $2.3 billion to shareholders after it completes the sale of its insurance unit to Phoenix Group Holdings.
The asset manager will issue $1.3 billion of new B shares and buy back about $995.3 million of stock using capital freed up from the sale of the insurer. The balance of the money from the deal will be used to retire bonds and support investment, the firm said in a statement ahead of its annual general meeting on Tuesday.
"It’s slightly more than expected," says David McCann, an analyst at Numis Securities, who had estimated $1.78 billion in return to shareholders. Standard Life-Aberdeen fell as much as 1.5% in London trading and was down 1.4%.
Standard Life had hoped that the sale of the insurance unit would improve its chances of keeping a mandate to manage $144.66 billion that it invests for Lloyds Banking, its biggest client. The bank is holding a contest among fund managers interested in overseeing the money after it decided to pull the capital following the merger of Aberdeen and Standard Life, which it says made the combined firm a competitor. The asset manager is challenging Lloyds decision to allocate the capital elsewhere.
The cash return can be taken as a sign that the company doesn’t have any large acquisition plans, Standard Life Aberdeen co-CEO Martin Gilbert says.
Standard Life hasn’t given up on keeping the Lloyds money, and dialog with the bank remains constructive, Gilbert says. The cash return can be taken as a sign that he company isn’t considering large-scale acquisitions as it continues to work on integrating the two main parts of the company, he says.
The Edinburgh-based company will receive $3.1 billion in cash from the insurance unit sale as well as a stake of almost 20% in Phoenix. The sale will complete Standard Life’s transformation into a capital-light investment company,” Chairman Gerry Grimstone said in the statement.