At the time of the announcement of the 2017 merger of Standard Life plc (“Standard Life”) and Aberdeen Asset Management PLC (the “Merger”), and as noted in Standard Life’s shareholder prospectus dated 9 May 2017, Standard Life Aberdeen plc (LON:SLA), Lloyds Banking Group (LON:LLOY) and Scottish Widows committed to have discussions during the period of six months following the completion of the Merger on 14 August 2017.
Following the conclusion of the six month period, LBG and Scottish Widows have informed SLA that Scottish Widows and LBG’s Wealth business intend to review their long term asset management arrangements including those services that are currently undertaken by certain legacy Aberdeen entities under arrangements covering in aggregate c£109 billion of assets under management (the “AUM”) and agreed by Aberdeen with LBG at the time of Aberdeen’s acquisition of Scottish Widows Investment Partnership from LBG in 2014. The revenue associated with the AUM represents less than 5 per cent of SLA’s FY 2017 pro forma revenue.
Keith Skeoch and Martin Gilbert, Standard Life Aberdeen’s Chief Executives said: “We are disappointed by this decision in the context of the strong performance and good service we have delivered for LBG, Scottish Widows and their customers. We will be discussing the implications of this with LBG and Scottish Widows.”
LBG and Scottish Widows have sent notices to SLA from the relevant members of LBG seeking to terminate the investment management arrangements relating to the AUM to enable the review to take place. Under arrangements agreed between SLA and LBG/ Scottish Widows at the time of the Merger, any termination of these arrangements is subject to a 12 month notice period before such termination takes effect, which period commences on the date that notice is validly served.
SLA will take an impairment charge of approximately £40 million on the intangible asset relating to the LBG customer relationship recognised at the time of the Merger in its FY 2017 results.
Aberdeen Standard Investments is a leading manager of insurance assets, with over 100 clients, and c£176 billion (excluding the AUM) of insurance assets under management, and with propositions which position the company well for growth in this market segment.
