Gaining access to the wealth management arm of Lloyds was one of the key motivations for buying Scottish Widows Investment Partnership (Swip), Aberdeen chief executive Martin Gilbert has said.
As Aberdeen now looks to integrate the £136 billion asset management business, Gilbert said he was unable to confirm the extent of any job losses at this stage but accepted that ‘where there is duplication, there will be some job losses’. Nonetheless he stated that ‘this deal is not prefaced on cost cutting’ and noted that half of Aberdeen’s assets under management would be run out of Edinburgh.
Gilbert said the 'Investment Solutions' divisions within Swip had swung the deal for him. The division advises on approximately £15 billion of discretionary assets for clients of Lloyds Wealth.
‘We were of the view that it was absolutely vital that it was included,’ said Gilbert. ‘We wouldn’t have done the deal without it.’
He added: ‘It was the solutions business that made the deal more attractive to us than it was before.’
Gilbert set the importance of the division in the context of Aberdeen's acquisition of RBS Asset Management in 2010, when the equivalent business was 'left behind'. 'We learned a lot from that deal,' Gilbert remarked. 'The mistake we made was leaving the equivalent of the solutions business behind.'
Gaining control of Lloyds's discretionary assets will add to the £7 billion of assets that Aberdeen's multi-manager team currently runs for Coutts via the Equator funds.
Subject to the business’s growth over the next five years, Aberdeen will have to pay an additional £100 million to Lloyds on top of the £550 million it has agreed to pay for Lloyds's asset management business. The deal will be funded by the issue of 131.8 million new shares to Swip owner Lloyds, equivalent to 9.9% of current market cap. The £100 million payment is conditional on five-year performance.‘If we have to pay that extra £100 million, it will be fantastic deal for both Aberdeen and Lloyds,’ argued Gilbert. ‘It will have paid for itself.’ He said too of Lloyds that ‘they want to be a bigger player in wealth management’.
Gilbert stressed that Aberdeen would not be entering a ‘tied relationship’ with Lloyds on the wealth management side. ‘That is healthy because we want to compete,’ he explained.
John Brett, global head of distribution at Aberdeen, affirmed that under the arrangements Aberdeen would offer 'best of breed' open architecture funds to Lloyds's clients. Gilbert added that he hoped to see Lloyds customers allocate more of their money to active funds, which would improve Aberdeen's margins, over the long term. 'Nothing is going to happen in the short term there,' he stated.
On the overlap between Aberdeen’s and Swip’s multi-asset teams, Gilbert claimed that the union would be positive. ‘We’ll combine the capabilities. It will provide a stronger service to Aberdeen, Swip and Lloyds customers.’
At 10:05 Aberdeen was up 13% on the news of the deal, trading at 482.6 pence.