Standard Life and Aberdeen Asset Management recently published a prospectus with details of the two companies’ £11 billion merger. The document refers to the fact Aberdeen Group is party to various agreements with Lloyds Bank. In 2013, Aberdeen Asset Management bought Scottish Widows Investment Partnership (SWIP) from Lloyds in a cash and shares deal that cost Aberdeen £550 million. The deal saw Lloyds take a 9.9% stake in Aberdeen.
The SWIP business still manages money for Lloyds. SWIP was renamed Aberdeen Asset Investments Limited. The deal transferred £136 billion in assets under management to Aberdeen’s operations. According to Aberdeen’s latest full year results to September 2016, it added £137 million in revenues as the group’s largest client.
According to the prospectus, because of the merger Lloyds ‘has the right to exercise termination rights’ and ‘make certain material unscheduled withdrawals of assets’. However, it said Lloyds has agreed to delay making a decision in relation to the exercise of such termination rights or withdrawals until six months from the date of completion of the merger. ‘If Lloyds elects to exercise any such applicable termination rights or make such withdrawals,’ it said, ‘this may have an adverse effect on the financial position of the combined group.’
The contract with Lloyds to run SWIP money was originally scheduled to have a term of at least eight years. A key tension for Lloyds is the prospect of Scottish Widows selling products managed by a group that includes its arch rival Standard Life.
Despite the rivalry, it is not wholly in Lloyds’ interests to pull out of the deal as it will be a substantial shareholder in the newly merged group.
Now, according to the Sunday Times, Standard Life has been linked with a swoop on Scottish Widows owned by Lloyd Bank. Lloyds has been exploring options for the business amid increased regulatory pressure following the credit crunch. Lloyds is reported to have backed a deal with Standard Life.
This move would seem to copper fasten the Standard Life/Aberdeen Asset Management merger, provided it receives all required regulatory approval.