Phoenix deal marks SLA transition to diversified investment business

Phoenix Group’s acquisition of Standard Life Assurance completes for £3.3bn

SLA

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Standard Life Aberdeen’s completion of its deal with Phoenix Group to shed its life assurance business unlocks hidden value in the company as it transitions into a diversified investment business.

Phoenix Group acquired Standard Life Assurance for £3.28bn in a deal that completed on Friday. Announced earlier this year, the deal sees Standard Life Aberdeen become the largest shareholder with 19.99%.

From life office to diversified investment business

Jason Hollands, managing director at Tilney described the deal as a very savvy transaction. Standard Life Aberdeen’s large stake makes it a “strategic shareholder” in a business that has developed a strong record of cash flow generation, Hollands said.

He added: “The sale of SLA’s capital-intensive insurance business to Phoenix is a really important part of the transformation of SLA from a life office into a diversified investment business and which also unlocks some hidden value in the process.”

Standard Life Aberdeen chairman Gerry Grimstone (pictured) touted the completion as a “momentous” day towards becoming a “world-class investment company”.

Hollands added: “Phoenix is a specialist in administering closed life books and has the scalable infrastructure in place to handle this business.”

SLA remains preferred asset management partner

Hollands added: “The good news for SLA is that it has put in place a long-term agreement to continue to manage the £48 billion of underlying investment assets as a preferred asset management partner, which although low fee in nature, provides a relatively stable, annuity-like revenue stream.”

In a trading update, SLA confirmed its intention to return up to £1.75bn in aggregate to its shareholders, subject to regulatory approval.

A share buyback of £175m has already begun and around £1bn is intended to be returned by way of a B share scheme, accompanied by a share consolidation. This would be followed by a further share buyback of up to £575m.

SLA has not announced the exact timings for the B Share scheme and consolidation.

As part of the deal, approximately 3,500 Standard Life Aberdeen employees move to Phoenix, with the majority based in Edinburgh.

 

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