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| Version 1 | Version 2 |
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| Standard Life and Aberdeen seek to tie in key staff in £11bn merger | Standard Life and Aberdeen seek to tie in key staff in £11bn merger |
| (35 minutes later) | |
| Standard Life and Aberdeen Asset Management are to offer lucrative lock-ins to key staff to stop them walking out following their £11bn deal to create a fund management powerhouse. | Standard Life and Aberdeen Asset Management are to offer lucrative lock-ins to key staff to stop them walking out following their £11bn deal to create a fund management powerhouse. |
| The deal to create Britain’s biggest fund manager with £660bn under management has sparked fears that key staff will quit and that hundreds of jobs will be cut in the enlarged businesses as it seeks to cut £200m a year in costs. | The deal to create Britain’s biggest fund manager with £660bn under management has sparked fears that key staff will quit and that hundreds of jobs will be cut in the enlarged businesses as it seeks to cut £200m a year in costs. |
| It has also raised questions about how Keith Skeoch, the chief executive of Standard Life, and Martin Gilbert, the chief executive of Aberdeen, would work together as co-chief executives of the enlarged Scottish-based company. | |
| As they unveiled the deal, amid speculation that rival offers could emerge, the pair insisted they got on well and that their skills were complementary – although analysts were not convinced. | |
| “We have grave concerns over the structure of the board,” said Eamonn Flanagan, an analyst at Shore Capital. “To us, a single CEO calling the shots and retaining overall responsibility is critical in all such transactions … we wait to see how the chemistry between Skeoch and Gilbert develops.” | “We have grave concerns over the structure of the board,” said Eamonn Flanagan, an analyst at Shore Capital. “To us, a single CEO calling the shots and retaining overall responsibility is critical in all such transactions … we wait to see how the chemistry between Skeoch and Gilbert develops.” |
| Flanagan said the equal number of members from each company on the board – despite the fact Standard Life would comprise two-thirds of the enlarged entity – showed that the focus was turning to fund management and away from Standard Life’s traditional life insurance business. | Flanagan said the equal number of members from each company on the board – despite the fact Standard Life would comprise two-thirds of the enlarged entity – showed that the focus was turning to fund management and away from Standard Life’s traditional life insurance business. |
| Gilbert, whose firm has suffered 15 consecutive quarters of investors withdrawing their cash, refused to disclose how many jobs would be lost as the enlarged company admitted it would spend £320m to cut costs. | Gilbert, whose firm has suffered 15 consecutive quarters of investors withdrawing their cash, refused to disclose how many jobs would be lost as the enlarged company admitted it would spend £320m to cut costs. |
| “We just can’t talk about job losses,” said Gilbert, insisting estimates of 1,000 were “grossly exaggerated”. Standard Life employs more than 6,000 staff and Aberdeen, which bought the Scottish Widows fund management arm of Lloyds Banking Group three years ago, almost 3,000. | “We just can’t talk about job losses,” said Gilbert, insisting estimates of 1,000 were “grossly exaggerated”. Standard Life employs more than 6,000 staff and Aberdeen, which bought the Scottish Widows fund management arm of Lloyds Banking Group three years ago, almost 3,000. |
| Gilbert showed analysts a slide of all the sporting events sponsored by both companies and quipped: “It’s always been one of my ambitions to sponsor Andy Murray” – the Scottish tennis player backed by Standard Life. | |
| Both businesses are key to Scotland’s financial services industry, which has been facing questions about its future following Brexit. The Scottish government has been in contact with both companies and said this would continue as “the merger progresses to discuss employment and investment in Scotland”. | |
| “We welcome the intention to grow the business in Scotland and to build on the expertise and skills of both companies and strengthen Scotland’s reputation for fund and asset management,” a Scottish government spokesperson said. | “We welcome the intention to grow the business in Scotland and to build on the expertise and skills of both companies and strengthen Scotland’s reputation for fund and asset management,” a Scottish government spokesperson said. |
| The companies insisted the aim was growth and the creation of a “powerhouse in asset management” able to take on huge US rivals such as BlackRock and Vanguard, and with £660bn of savings and pensions to manage in 80 countries. | |
| Both firms are battling their own problems and talks between the two executives began in January. | Both firms are battling their own problems and talks between the two executives began in January. |
| “There is more than enough for both of us to do,” said Skeoch, who has been chief executive of Standard Life since 2015. Gilbert created Aberdeen, which is known for its focus on emerging markets, more than 30 years ago. | |
| Skeoch said the two men liked each other – they have known each other for 30 years and go fishing together – and had easily reached agreement about a number of issues during the six weeks of merger talks. | |
| There was no information about how much the two chief executives would be paid but Gilbert told analysts that schemes were “being implemented” to retain crucial staff. It is not yet clear how the two brands will be used, or what the new business will be called. | There was no information about how much the two chief executives would be paid but Gilbert told analysts that schemes were “being implemented” to retain crucial staff. It is not yet clear how the two brands will be used, or what the new business will be called. |
| Sir Gerry Grimstone, the Standard Life chairman, will chair the enlarged company. Aberdeen’s chairman, Simon Troughton, is to be deputy chairman while his colleague Bill Rattray and Standard Life’s Rod Paris will become finance director and chief investment officer respectively. | |
| The deal involves no cash and shareholders in Aberdeen will receive 0.757 new shares, valuing the company at £3.8bn. | The deal involves no cash and shareholders in Aberdeen will receive 0.757 new shares, valuing the company at £3.8bn. |
| Both said the deal was based on strategic logic but analysts at Cantor Fitzgerald questioned this argument. “Given the headwinds faced by the asset management industry from passive investing, pricing and regulatory pressures, this looks like a defensive deal.” | Both said the deal was based on strategic logic but analysts at Cantor Fitzgerald questioned this argument. “Given the headwinds faced by the asset management industry from passive investing, pricing and regulatory pressures, this looks like a defensive deal.” |
| The fund management industry is under pressure to cut costs because of increased use of investments tracking the index – passive investing – which means firms are becoming bigger. The bigger the index tracking fund the cheaper it is to operate, making active fund managers – such as stock pickers – appear less profitable. | |
| Aberdeen’s two biggest investors – Japan’s Mitsubishi and Lloyds Banking Group – have both agreed to back the deal. | Aberdeen’s two biggest investors – Japan’s Mitsubishi and Lloyds Banking Group – have both agreed to back the deal. |
| Standard Life’s shares rose 6% to 400p while Aberdeen’s were up 4% at 299p. Aberdeen’s shares were trading at 500p two years ago. Standard Life shareholders will receive the already announced 13.35p-a-share dividend and Aberdeen’s previously announced 7.5p-a-share payout. | Standard Life’s shares rose 6% to 400p while Aberdeen’s were up 4% at 299p. Aberdeen’s shares were trading at 500p two years ago. Standard Life shareholders will receive the already announced 13.35p-a-share dividend and Aberdeen’s previously announced 7.5p-a-share payout. |
| Standard Life | Standard Life |
| Founded: 1825Based: EdinbughStaff: 6,300 (5,500 in the UK)Business: A life insurance business with an increasing focus on fund management, including the single biggest fund in the UK, the £26.3bn Global Absolute Return Strategies fundSponsorship: Tennis champion Andy Murray, worldwide partner of the Ryder Cup and a principal partner of the British and Irish Lions rugby team | Founded: 1825Based: EdinbughStaff: 6,300 (5,500 in the UK)Business: A life insurance business with an increasing focus on fund management, including the single biggest fund in the UK, the £26.3bn Global Absolute Return Strategies fundSponsorship: Tennis champion Andy Murray, worldwide partner of the Ryder Cup and a principal partner of the British and Irish Lions rugby team |
| Aberdeen Asset Management | Aberdeen Asset Management |
| Founded: 1983Based: AberdeenStaff: 2,800 (1,600 in the UK)Business: Investing in emerging marketsSponsorship: Golf, men’s and ladies’ Scottish Opens, 12 ski schools across Switzerland, Melrose Sevens rugby | Founded: 1983Based: AberdeenStaff: 2,800 (1,600 in the UK)Business: Investing in emerging marketsSponsorship: Golf, men’s and ladies’ Scottish Opens, 12 ski schools across Switzerland, Melrose Sevens rugby |