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As £11bn Aberdeen deal approved...

Standard Life plays down Widows merger talk

Gerry Grimstone

Sir Gerry Grimstone: major force


Standard Life chairman Sir Gerry Grimstone today poured cold water on any immediate plan for talks about a merger with Scottish Widows.

Following further speculation at the weekend he told shareholders today that there was “novelty” in a Sunday Times article which said the two companies were due to begin discussions. Sir Gerry said he did not recognise certain statements that were reported.

Speaking after shareholders voted overwhelmingly for a merger with Aberdeen Asset Management he said the board would be willing to discuss a “relationship” with Scottish Widows which may mean building on existing arrangements they share, mainly through Aberdeen’s management of Widows funds.

“The exact form of that relationship is something we will talk to Lloyds about once this deal [the Aberdeen merger] is complete,” he said.

He acknowledged that the focus of the company was shifting from being almost equally balanced between fund management and pensions & savings, to being 80-20 in favour of the former. It is also being reclassified as a fund manager.

But he said takeover rules prevented it holding any talks with Lloyds which owns 9.9% of the company.

“We have not sold life policies for a long time but we are a powerhouse in the pensions and savings business and so life and pensions are important to us,” he said.

At 2.42pm, amid the splendour of Edinburgh’s Georgian Assembly Rooms, shareholders voted by 98.6% to 1.4% to end the company’s 200 years of independence and herald a new era as an £11 billion merged company to be known as Standard Life Aberdeen.

Shareholders heard pledges from the board that the merger would enable it to become a “major force” in the world’s financial markets. Aberdeen shareholders earlier approved the deal by a 95.84% majority.

Sir Gerry assured an audience of more than 200 that there would be no issues with the controversial plan for joint CEOs and that job losses would be handled sensitively. He also said the 16-member board, which has raised some eyebrows, will be “larger than is customary, but its size will be progressively reduced over time”.

“We have been turning Standard Life which was Europe’s largest mutual life assurance company into a world class investment company that has strong distribution capabilities including being a powerhouse in Britain’s pensions and savings market,” he said.

“We expect this merger to advance that strategy significantly and, indeed, to be transformational for Standard Life.

“The merger will create the potential to broaden and deepen our investment capabilities as well as grow and diversify our sources of revenue and profit.”

The combined business will have 50 distribution centres in 80 countries and will have £670bn of assets under management.

Sir Gerry added: “It will enhance some very powerful strategic relationships which currently include John Hancock, HDFC and Sumitomo Mitsui Trust Bank, as well as exciting strategic possibilities with Lloyds Bank in the UK and the Mitsubishi Trust and Banking Corporation in Japan who are both significant shareholders in Aberdeen and very supportive of the merger.”

The merger will save £200m a year, mainly in office closures and job cuts. Speaking afterwards Sir Gerry was unable to confirm which offices would close or confirm the future of the former SWIP offices (now Aberdeen) in Morrison St, Edinburgh. The ‘Aberdeen’ sign has recently been removed.

Standard Life Investments is due to expand its George St headquarters by taking space in the new building in nearby St Andrew Square.

 

Aberdeen Asset Management offices

Aberdeen Asset Management offices: sign removed

CEO Keith Skeoch said the merger would enable the combined group to create the scale necessary to invest in the business.

He said it was likely that 300 of the proposed 800 job losses would come in the first two years, but added that natural wastage accounts for 10% of staff every year which would lessen the need for redundancies.

Shares in Standard Life rose 2.4% and Aberdeen Asset Management by 5%,

Shareholders in Standard Life will hold the same number of shares in the new company. Aberdeen shareholders will receive new Standard Life shares in exchange for their current holdings.

There will be 1 billion new shares, increasing the total to 3 billion.

Comment: Would a merger with Widows add up?

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