Aberdeen Asset Management said it’s in talks to buy Scottish Widows Investment Partnership from Lloyds Banking Group, a deal that would make it Europe’s largest publicly traded money manager.
Aberdeen would pay for the acquisition by issuing new shares to Lloyds, representatives of the Scottish money manager said in a statement Thursday. It would also make further cash payments over time depending on the performance of SWIP, which runs about £146 billion ($236 billion).
The purchase would increase Aberdeen’s assets under management to about £350 billion, allowing it to surpass Schroders PLC as Europe’s biggest publicly traded fund company. It would also mark a reversal of Aberdeen’s strategy to focus on growth without acquisitions and returning cash to investors.
Aberdeen CEO Martin Gilbert had previously called an acquisition of SWIP “highly unlikely.”
“Aberdeen is once again an acquisition-driven growth story and not a dividend yield/capital-return story,” Peter Lenardos, an analyst at RBC Capital Markets who rates Aberdeen outperform, said in a note to clients Thursday.
The money manager said it’s also in talks to start a “strategic partnership” with Lloyds, without giving further details. Spokesmen for both companies declined to comment.
Equities accounted for 56% of Aberdeen’s AUM as of June 30. Of that, the firm invests two-thirds in global emerging markets and Asia-Pacific stocks. Only 2.8% of its stock holdings are in the U.K. and 0.9% in Europe. By comparison, more than a third of SWIP’s assets are in U.K. and European equities, and it has just £1.7 billion in emerging markets stocks.
“A balance to the strength of Aberdeen’s emerging markets business would probably be a good thing,” Stuart Duncan, an analyst at Peel Hunt with a buy rating on the Scottish firm, said in a telephone interview. “Their U.K. equities business is relatively small and they could do with some more assets.”
Lloyds CEO Antonio Horta-Osorio has sought to bolster the company’s balance sheet by selling assets, cutting costs and eliminating jobs following the bank’s government bailout in 2008. The London-based lender purchased Scottish Widows, which runs both a life insurance business and the SWIP fund-management operation, for £7.3 billion in 2000.