Aberdeen buys SWIP in strategic tie-up with parent Lloyds Bank

Aberdeen Asset Management is taking over Scottish Widows Investment Partnership (SWIP) as part of a long-term strategic relationship with SWIP's current owner, Lloyds Banking Group.

Aberdeen Asset Management said the acquired business will add £136 bn (€162 bn) worth of assets under management with annualised revenues of £234 mln. The enlarged group will manage £350 bn of equity, fixed income and property assets.

According to PropertyEU's latest Top Investors publication, Aberdeen Asset Management had €21.7 bn of real estate assets under management at end-2012, while SWIP had a property AUM of €10.1 bn.

The acquisition includes the Investment Solutions division of SWIP which is a separate investment group that is responsible for the design, development and management of investment solutions for Lloyds’ wealth clients.

The consideration for the acquisition of some £550 mln (655 mln) is based on an Aberdeen share price of 420 pence per share.

The sum will be paid in the form of 131.8 million new Aberdeen shares to be issued to Lloyds, equivalent to a 9.9% stake in the enlarged Aberdeen group following completion of the acquisition.

In addition, there will be a performance-related, five-year earn-out payment of up to £100 mln dependent on growth delivered by the strategic relationship with Lloyds in the Investment Solutions business.

Martin Gilbert, CEO of Aberdeen Asset Management, said: 'This transaction is significant for the long-term prospects of Aberdeen in a number of 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.'

The tie-up with Lloyds is significant as it will likely maintain the equity flow from Lloyd's institutional and private clients into the SWIP part of the business.

This contrasts with Aberdeen's acquisition of the Degi open-ended real estate fund business from Dresdner Bank in 2007. Although the deal added £4.6 bn of assets in property funds to Aberdeen's AUM, Degi was deprived of the support of a distrubution network of banking clients as Dresdner was taken over by Commerzbank, which had its own property fund business, CommerzReal, to finance.

Several of Degi's funds were later caught up in the German open-ended fund's liquidity squeeze and are now in liquidation.