EUROPE – Aberdeen Asset Management is acquiring Scottish Widows Investment Partnership (SWIP) in a major deal that will see Aberdeen’s real estate business increase to around £23.5bn (€28bn) from about £16bn.
Following the merger, property will account for 7% of the combined firm’s assets of £336bn, down slightly in percentage terms from the 8% of Aberdeen’s £200bn under management that property now represents.
The acquisition, subject to regulatory approval, is worth £550m (€657m).
It involves a partnership between Aberdeen and the UK’s Lloyds Banking Group, which will take a 9.9% stake in Aberdeen as part of the deal.
Russell Chaplin, property CIO at Aberdeen, said the acquisition would cement Aberdeen’s position as a top five real estate manager in Europe.
“The majority of SWIP portfolios are invested in the UK, and a particularly attractive part of the deal was the £2.4bn pooled fund, which fills a gap in our product range and is a vehicle we are optimistic about growing,” he said.
Martin Gilbert, Aberdeen’s chief executive, said property was one of three key attractions of the acquisition.
“When we sat down at the beginning of this year, there were three areas of the business we wanted to grow, and try and move away from this huge reliance we have on (…) global emerging market equities, global equities and Asian equities,” he said.
The three areas Aberdeen wanted to grow were fixed income, property and solutions, he said.
“This transaction satisfies all these three criteria,” he said.
Gilbert said he was confident the transaction would deliver considerable additional value to Aberdeen’s expanded client base and that this would therefore benefit its shareholders.
He said the deal was key for the long-term prospects of Aberdeen in several ways.
“It strengthens our investment capabilities and adds new distribution channels; the acquisition of SWIP adds scale to our business across a range of asset classes; and it also introduces a strategic relationship with Lloyds Banking Group,” he said.
Aberdeen said it would pay the consideration of around £550m to Lloyds by issuing 131.8m new Aberdeen shares to Lloyds, equivalent to a stake of about 9.9% stake in the group following completion of the deal.
On top of this there will be a performance-related, five-year payment of up to £100m, which will be dependent on growth delivered by the strategic relationship with Lloyds in the Investment Solutions business.
Lloyds has agreed to keep all the new shares for 12 months, and is committed to retaining two-thirds of the stake for two years.
It will be allowed to sell down all but one-third of its total stake three years after the deal has been finalised.
Aberdeen also said the acquisition of SWIP’s private equity and infrastructure businesses would be independent of the remainder of the deal.
If these fail to complete, there will be a reduction in the £550m consideration.
Separately, SWIP has bought a London office and retail property from Rockspring in an off-market deal for £40m.
Rockspring Property Investment Managers said it sold the Harlequin Building on Southwark Street in south-east central London on behalf of the Rockspring UK Value Fund (RUKV) to SWIP on behalf of the HIFML UK Property Fund (HIFML).
Geoff Hepburn, fund manager in SWIP’s real estate team, said the deal was done off-market in only seven days.
“The Southbank occupational market is moving at a tremendous pace, and we expect this asset to return excellent rental growth and performance for our investors as the location continues to mature,” he said.