Shares in Standard Life (LON:SL) have fallen into the red in today’s session, as analysts at Berenberg trimmed their stance on the blue-chip insurer, arguing that its merger with smaller London-listed peer Aberdeen Asset Management (LON:ADN) offers little upside. The comments come after the two companies announced their tie-up plans last week.
As of 13:33 GMT, Standard Life’s share price had lost one percent to 376.10p, underperforming the broader market, with the benchmark FTSE 100 index having climbed into positive territory and currently standing 0.38 percent higher at 7,370.83 points. The group’s shares have gained just under three percent over the past year, as compared with about a 20-percent rise in the Footsie.
Berenberg lowered its rating on Standard Life from ‘buy’ to ‘hold’ today and trimmed its price target on the shares from 416p to 400p, arguing that the merger with Aberdeen, announced last week, offers little upside and substantial risk. The analysts explained that the potential benefits rely more on a major change in fortune for the smaller group’s funds than they do on any cost savings, and said that the level of disruption which could be caused to Standard Life’s business is high.
“Standard Life Investments arguably already had reasonable scale in many core areas and a renewed focus on costs. It had invested much time and money in building diversification and its organic growth strategy in areas where it was underweight had shown early signs of bearing fruit,” the broker pointed out, as quoted by Sharecast. “Continued disciplined execution of the existing strategy would have paid off, in our view, and carried less risk. Patience is a virtue that seems to be lacking in Standard Life's boardroom.”
Berenberg further highlighted concerns that the integration phase will bring about unwelcome distractions, loss of focus and likely disruption of fund flows at both companies.