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Aberdeen confirms Swip bid talks
by Dylan Lobo on Oct 24, 2013 at 11:46
News Aberdeen Asset Management is in bid talks with Scottish Widows Investment Partnership (Swip) has raised concern the firm has sacrificed its dividend growth mentality.
The market applauded the news, propelling shares in the asset manager 5.2% higher to 447.6p at 1.35pm - around 45p shy of their 52-week high of 492.2p. Swip's current owner Lloyds was also trading 1.85p higher at 79.76p.
However, RBC analyst Peter Lenardos was slightly more tepid in his reaction.
Lenardos said: 'We have a mixed reaction. We are supportive of a transaction that creates shareholder value, delivers substantial cost savings and is earnings enhancing. We further note Aberdeen’s successful track record of acquisitions.'
'However, assuming successful completion of the proposed transaction, the share count should now be expected to increase, and the dividend may not increase as much as we expect. Thus, Aberdeen is once again an acquisition-driven growth story and not a dividend yield/capital return story.'
'While Aberdeen is likely to continue to increase its dividend, it will likely do so more incrementally, and share buybacks will occur “over time”, which likely indicates not in the short-term.'
In its announcement to the London Stock Exchange earlier this afternoon, Aberdeen stressed the purchase would not impact its dividend policy, which has seen it become a powerhouse for income investors over the last few years as it chose to return cash rather than spend it on acquisitions.
This was illustrated in the first half when the firm raised its payout to 6p per share, an increase of 36% on 2012.
'[The buy] would reinforce the company's commitment to a progressive dividend policy and to return surplus capital to shareholders over time,' Aberdeen said in its statement.
The proposed deal
In the statement, which was triggered by press speculation, Aberdeen said if the deal goes through it would form a strategic partnership with Lloyds.
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