Asset manager agrees to pay £660m in total for bank's fund management arm
*Aberdeen Asset Management* is leading the FTSE 100 with a 13% rise after its long awaited purchase of fund management group Scottish Widows from *Lloyds Banking Group*.
With Australia's Macquarie waiting in the wings, there had been concerns Aberdeen could get caught up in a bidding war. But it has agreed a £660m cash and share deal with £100m deferred depending on future performance. As part of the agreement Aberdeen will manage assets on behalf of Lloyds, which is still 33% owned by the UK taxpayer.
The purchase will make Aberdeen the biggest listed fund management group in Europe with assets of around £340bn.
Aberdeen is issuing 132m new shares to Lloyds to pay the initial £560m, giving the banking group a 9.9% stake in the company. Lloyds has agreed to keep its initial shareholding for at least a year, but can gradually sell down its stake after that. Aberdeen's chief executive Martin Gilbert said:
We are confident that this transaction will deliver considerable additional value to our expanded client base and that this will therefore benefit our shareholders.
Aberdeen also issued final results showing a 24% rise in revenues to £1.07bn and a 39% increase in underlying profits to £482.7m.
Aberdeen's shares have added 57.2p to 484p while Lloyds has climbed 0.68p to 76.06p. At Espirito Santo, analyst Phil Dobbin said the results looked strong and the Scottish Widows purchase seemed a good deal:
At its pre-close [Aberdeen] stated that pretax profit would be at the top of consensus, which at the time was in the mid £470m's. Profit has actually been reported at £482.7m, on an operating margin up to 45.4% from 40.6%. The dividend is reported at 16p, up 39%, which will be viewed positively given the announced Scottish Widows deal and we assume that the company will want to maintain dividend growth in the mid-teens going forward.
As rumoured Aberdeen will pay an initial £550m in shares [for Scottish Widow]. Lloyds will end up with a 9.9% holding. The deal is expected to be materially earnings enhancing in year one, will add distribution channels and bring a strategic relationship with Lloyds. The acquired business will be taken on a marginal operating margin of 55%. We view this as a positive set of figures at the operational level and a well-priced acquisition.
Elsewhere *Royal Bank of Scotland* has risen 0.9p to 330.9p after saying it was in talks to sell its retail investor products and equity derivatives business.
Overall the *FTSE 100* is virtually unchanged, down 1.36 points at 6692.08, ahead of the US Federal Reserve minutes due on Wednesday. Toby Morris, senior sales trader at CMC Markets said:
Given recent reliance on Fed commentary and a void of Economic numbers today, bulls seem have decided to sit on the fence ahead of Wednesday's minutes release, as European equities posted small losses amid light volumes.
Again a strong session in China and Hong Kong has failed to filter through to the European open. With details of Chinese reforms released on Friday pushing the Hang Seng up over 2%, but falling short of drawing Europe into the party.
British Airways owner *International Airlines Group* was among the other gainers, up 7.5p to 369.7p after Nomura issued a buy note and raised its price target from 335p to 380p. Following the airline's investor day on Friday, Nomura analyst Andrew Evans said:
The presentations from each of the group airlines highlighted they are in different stages of development:
British Airways is benefiting from the strength of the North Atlantic and cost discipline put in place in previous years. Further cost focus (helped by new aircraft introductions) and RASK [revenue per available seat kilometre] improvements drive an improved outlook. Digesting 2014 capacity growth is a key task.
Iberia, the group‟s problem child, has made significant changes to top management and
has set the path of one of two routes; change and prepare for growth; or remain the same and prepare for further shrinking. We believe there are significant opportunities for the new management team on both the cost and revenue side.
Vueling has benefited from Spanair‟s demise and the pullback of capacity from competitors in Spain. Costs reductions remain in focus, but the future challenge is growth outside of Spain.
A key takeaway is IAG's capital discipline focus, with the framework for 12% return on capital employed set out at the investor day. Achieving this target sustainably would pave the way for dividends and set the tone for value-adding growth in the future.
Reported by guardian.co.uk 6 hours ago.
*Aberdeen Asset Management* is leading the FTSE 100 with a 13% rise after its long awaited purchase of fund management group Scottish Widows from *Lloyds Banking Group*.
With Australia's Macquarie waiting in the wings, there had been concerns Aberdeen could get caught up in a bidding war. But it has agreed a £660m cash and share deal with £100m deferred depending on future performance. As part of the agreement Aberdeen will manage assets on behalf of Lloyds, which is still 33% owned by the UK taxpayer.
The purchase will make Aberdeen the biggest listed fund management group in Europe with assets of around £340bn.
Aberdeen is issuing 132m new shares to Lloyds to pay the initial £560m, giving the banking group a 9.9% stake in the company. Lloyds has agreed to keep its initial shareholding for at least a year, but can gradually sell down its stake after that. Aberdeen's chief executive Martin Gilbert said:
We are confident that this transaction will deliver considerable additional value to our expanded client base and that this will therefore benefit our shareholders.
Aberdeen also issued final results showing a 24% rise in revenues to £1.07bn and a 39% increase in underlying profits to £482.7m.
Aberdeen's shares have added 57.2p to 484p while Lloyds has climbed 0.68p to 76.06p. At Espirito Santo, analyst Phil Dobbin said the results looked strong and the Scottish Widows purchase seemed a good deal:
At its pre-close [Aberdeen] stated that pretax profit would be at the top of consensus, which at the time was in the mid £470m's. Profit has actually been reported at £482.7m, on an operating margin up to 45.4% from 40.6%. The dividend is reported at 16p, up 39%, which will be viewed positively given the announced Scottish Widows deal and we assume that the company will want to maintain dividend growth in the mid-teens going forward.
As rumoured Aberdeen will pay an initial £550m in shares [for Scottish Widow]. Lloyds will end up with a 9.9% holding. The deal is expected to be materially earnings enhancing in year one, will add distribution channels and bring a strategic relationship with Lloyds. The acquired business will be taken on a marginal operating margin of 55%. We view this as a positive set of figures at the operational level and a well-priced acquisition.
Elsewhere *Royal Bank of Scotland* has risen 0.9p to 330.9p after saying it was in talks to sell its retail investor products and equity derivatives business.
Overall the *FTSE 100* is virtually unchanged, down 1.36 points at 6692.08, ahead of the US Federal Reserve minutes due on Wednesday. Toby Morris, senior sales trader at CMC Markets said:
Given recent reliance on Fed commentary and a void of Economic numbers today, bulls seem have decided to sit on the fence ahead of Wednesday's minutes release, as European equities posted small losses amid light volumes.
Again a strong session in China and Hong Kong has failed to filter through to the European open. With details of Chinese reforms released on Friday pushing the Hang Seng up over 2%, but falling short of drawing Europe into the party.
British Airways owner *International Airlines Group* was among the other gainers, up 7.5p to 369.7p after Nomura issued a buy note and raised its price target from 335p to 380p. Following the airline's investor day on Friday, Nomura analyst Andrew Evans said:
The presentations from each of the group airlines highlighted they are in different stages of development:
British Airways is benefiting from the strength of the North Atlantic and cost discipline put in place in previous years. Further cost focus (helped by new aircraft introductions) and RASK [revenue per available seat kilometre] improvements drive an improved outlook. Digesting 2014 capacity growth is a key task.
Iberia, the group‟s problem child, has made significant changes to top management and
has set the path of one of two routes; change and prepare for growth; or remain the same and prepare for further shrinking. We believe there are significant opportunities for the new management team on both the cost and revenue side.
Vueling has benefited from Spanair‟s demise and the pullback of capacity from competitors in Spain. Costs reductions remain in focus, but the future challenge is growth outside of Spain.
A key takeaway is IAG's capital discipline focus, with the framework for 12% return on capital employed set out at the investor day. Achieving this target sustainably would pave the way for dividends and set the tone for value-adding growth in the future.
Reported by guardian.co.uk 6 hours ago.