Aberdeen share price: asset manager seen paying low price for SWIP

on Nov 19, 2013
Updated: Oct 21, 2019

iNVEZZ.com, Tuesday, November 19: Aberdeen Asset Management (LON:ADN) has paid a low price for Lloyds Banking Group’s (LON:LLOY) Scottish Widows Investment Partnership (SWIP), the Financial Times has reported. The news of the acquisition yesterday sent Aberdeen’s share price soaring to close 14.74 percent higher at 489.70p. Lloyds’ share price also advanced, closing 1.05 percent up at 76.170p.

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**Aberdeen paying sensible price for SWIP**
Trade these shares now through Hargreaves Lansdown from £5.95 per deal.
Aberdeen yesterday announced that it had agreed to buy Lloyds’ SWIP for approximately £550 million, to be satisfied by the issue of 131.8 million new Aberdeen shares to Lloyds, equivalent to an approximate 9.9 percent interest in the company following completion of the acquisition. In addition, Lloyds will receive a further £100 million in cash over five years depending on growth delivered by Aberdeen’s strategic relationship with Lloyds. (Lloyds share price: Bank sells SWIP to Aberdeen Asset Management in £660 million deal)

The FT noted that SWIP will cost Aberdeen 2.4 times sales at the agreed reference price for the shares, before the £100 million cash earn-out, while three times would be typical. One reason for the low price is that insurance funds make up the bulk of SWIP’s £136 billion of assets, paying fees at around one-third of the rate for money invested on behalf of wealth management clients.

The Times quoted Canaccord analysts as saying that the price paid for the SWIP acquisition looked sensible and enabled “a diversification of Aberdeen’s product offering.”
**‘Considerable additional value’**
Commenting on the transaction, Aberdeen’s chief executive Martin Gilbert pointed out that SWIP would add “considerable additional value” to his company. The acquisition will also increase Aberdeen’s size, bringing its assets under management close to £340 billion and allowing the company to surpass Schroders as Europe’s largest publicly traded fund manager.

“You need a certain amount of size to compete with big Americans,” Gilbert told Bloomberg Television. “Strategically it fulfils a large number of criteria,” he added, referring to the SWIP acquisition.
The Wall Street Journal quoted Pras Jeyanandhan, an analyst at Berenberg Bank, as noting that the deal would significantly diversify Aberdeen’s assets ‘in a stroke,’ and that Aberdeen should be able to improve margins at SWIP by integrating the business and cutting around 45 percent from its costs.

The deal is also a boost for Lloyds which will be able to use Aberdeen’s shares to strengthen its balance sheet. As the WSJ noted, Lloyds’ chief executive Antonio Horta-Osorio said the SWIP sale had been under consideration by the bank for more than a year, after it concluded that it was not “the best owner for it” in the long term.
**On November 19, buy Aberdeen shares at 481.20p.**
**On November 19, sell Aberdeen shares at 480.90p.**
**On November 19, buy Lloyds shares at 75.23p.**
**On November 19, sell Lloyds shares at 75.20p.**
Trade these shares now through Hargreaves Lansdown from £5.95 per deal.
Prices can go up and down meaning you can get back less than you invest. This is not advice. Dealing services provided by Hargreaves Lansdown.


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