Standard Life Aberdeen (SLA) investors will enjoy a £1.75 billion windfall if the proposed sale of the group’s UK and European insurance business goes to plan.
The Scottish financial services giant, which held its maiden annual general meeting in London yesterday, recently struck a £3.2bn deal to sell its “capital intensive” assurance arm to Phoenix Group.
Edinburgh-based SLA would receive £2.3bn in cash and a 19.9% slice of the Phoenix business.
The transaction is expected to create surplus capital.
SLA plans to return £1bn to investors’ pounds through a B stock scheme and up to £750 million via a share buyback, subject to regulatory approval and market conditions.
Shareholders will be asked to approve the move at a meeting likely to be held on June 25.
The balance of proceeds from the Phoenix deal, combined with existing resources within SLA, will be used to “retire” some of the group’s £1.9bn debt pile and support investment and other general corporate purposes.
The disposal is expected to be complete in the third quarter of this year.
SLA chairman Sir Gerry Grimstone said: “The last year has been a period of significant change for Standard Life Aberdeen, with the proposed sale of the UK and European insurance businesses completing our transformation to a capital light investment company.
“We are continuing to focus on harnessing the breadth and depth in our investment capabilities to deliver cost-effective solutions to meet the needs of our clients and customers across multiple channels and geographies.
“Cash generated from the sale will enable us to continue to invest in the development of our business and also to return surplus capital to shareholders.”
It is thought the sale could pave the way for a U-turn by Lloyds Banking Group (LBG) over its decision to pull the plug on £109bn-worth of business with SLA.
LBG announced its planned withdrawal in February, citing competition issues arising from last year’s merger of Aberdeen Asset Management (AAM) and Standard Life.
SLA co-chief executive Martin Gilbert said he was hopeful LBG may have a change of heart over its move to cut longstanding ties with AAM and, more recently, SLA as part of a review of asset management arrangements.
The end of SLA’s partnership deals with LBG-owned Scottish Widows and LBG Wealth is subject to a 12-month notice period.
An exit by Scottish Widows and LBG Wealth would remove nearly 17% off total assets under management as of September 30 2017, when they were worth £646.2bn.
This month, SLA said it did not consider that LBG, whose businesses also include Bank of Scotland, had the right to bail out of a long-term asset management partnership.
But LBG insisted contractual terms of its previous relationship with AAM allowed it to terminate its investment management agreements because Standard Life was a “material competitor”.
The two groups are now in a dispute resolution process.
SLA’s annual meeting saw Mr Gilbert and fellow co-CEO Keith Skeoch quizzed about the group’s unusual leadership structure.
Mr Gilbert’s other boardroom roles also came under scrutiny, with one shareholder suggesting he was devoting too much time to “outside interests”.