Standard Life and Aberdeen create UK's largest asset manager

Shares jump after companies agree £3.8bn merger to fight competition from passive funds

Standard Life

Standard Life and Aberdeen Asset Management have agreed a £3.8bn merger that will create the UK's largest asset manager, says the Financial Times.

By buying its Edinburgh rival, 192-year old Standard Life is also taking the next "step in [its] evolution from a traditional insurer into an investment powerhouse", the paper adds.

The all-share deal values each Aberdeen share at 286.5p, a minimal 0.10p premium to the closing price last week.

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Aberdeen's shareholders will own a third of the combined entity while Standard Life shareholders will own the remaining two-thirds of the group, which will become the second-largest asset manager in Europe.

Standard Life chairman Sir Gerry Grimstone will sit at the top of the new firm, with Aberdeen's Simon Troughton as his deputy. Chief executives Keith Skeoch and Martin Gilbert will run the company on a joint basis.

The company will also carry a new brand that incorporates both of the existing names.

Bosses said the deal remains subject to a number of conditions, including shareholder approval, but early signs are good.

Lloyds Banking Group, one of Aberdeen's largest investors with a ten per cent stake, has confirmed it supports the tie-up, while on wider markets, the company's share rose by almost five per cent this morning. Standard Life's shares were up 5.7 per cent to more than 400p.

The rationale for the deal is seen as strong in that it will create an asset manager of larger scale to cope with competition from the likes of Blackrock and passive fund manager Vanguard.

The rise in passive investing, which invests in very low-cost funds that simply track a market, is hurting traditional fund managers, which are expensive and rely on fund managers generating outperformance.

"In the year to the end of September 2016, Aberdeen registered £32.8bn of net outflows," says the FT.

"By combining, asset managers often look to rip out redundant costs and also fire underperforming managers," the paper adds.

Among those "redundant costs" are synergies that will see duplicated activities cut, which analysts forecast will result in the loss of about 1,000 jobs, or around one in ten at the two firms, says the BBC.

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