Shares in Standard Life (LON:SL) have advanced in London in today’s session, outperforming the broader UK market, as HSBC turned bullish on both the blue-chip group and its mid-cap takeover target Aberdeen Asset Management (LON:ADN). The analysts argue that the tie-up between the two companies is sensible but defensive.
As of 13:44 BST, Standard Life’s share price had added 0.92 percent to 414.70p, outperforming the benchmark FTSE 100 index which has slipped marginally into the red and is currently 0.14 percent down at 7,403.19 points. Aberdeen’s share price meanwhile is 0.96 percent better off at 314.10p, as compared with a 0.07-percent dip in the mid-cap FTSE 250 index.
HSBC lifted its rating both on Standard Life and Aberdeen from ‘hold’ to ‘buy’ today and raised its price target on the stocks from 400.0p to 460.0p, and from 286.0p to 350.0p, respectively. Sharecast quoted the analysts as explaining that the tie-up would build scale, diversify the two companies’ businesses and help to compensate for revenue and cost pressures. They further noted that while that did not mean that the merger addressed all their issues, it did throw up some revenue and net inflow synergies. The broker estimates £200 million of proforma pre-tax cost savings.
“We believe the cost synergies are conservative given both managements’ track record in past acquisitions, and the UK asset management sector average at 50 percent,” HSBC pointed out.
The comments come after Standard Life and Aberdeen shareholders backed the merger last month, with the tie-up expected to complete a month from today. The enlarged company, to be called Standard Life Aberdeen, will be headed up by the FTSE 100 group’s chief executive Keith Skeoch and Aberdeen boss Martin Gilbert.