Shares in Standard Life (SL) soared 10% close to an all-time high after the pension and investments group sold its Canadian business for £2.2 billion (about C$4 billion) and promised to pay shareholders £1.75 billion in a special dividend.
Standard Life is selling the business to Manulife, Canada's biggest insurer, which wants to grow in Quebec where Standard Life has been strong. The two companies will also expand an existing partnership to distribute Standard Life Investments' (SLI) funds in Canada, the US and Asia, which is hoped will treble SLI's assets under management in three years.
The 73p per share special dividend will bring to £1.47 the total dividends and payouts Standard Life shareholders have received since 2010. It will be paid through a 'B/C share scheme' which makes the payment more tax efficient for UK shareholders who can choose whether to receive the money as capital or income. After the deal, Standard Life plans to consolidate, or reduce, the number of its shares.
Standard Life shares jumped 36p to 422p, close to their peak in May last year, as analysts welcomed the surprise move to shift a formerly loss-making business at 19.5 times earnings.
Alan Devlin, an analyst at Barclays Capital, said: 'We believe Standard Life owns some of the most attractive assets in UK life insurance but were concerned that there remained a large book of mature products, including Canada, which would temper earnings growth. The sale of its Canadian operations to Manulife removes one of the drags to growth, at an attractive valuation.'
Eamonn Flanagan of Shore Capital gave 'full marks' to Standard Life for exiting a business with C$52 billion of assets whose retirement products carried significant interest rate risk for the company. 'The disposal accelerates Standard Life's strategy of asset gathering and asset management and removes a major exposure of the group's balance sheet to spread and guarantee risk in our view,' he said.
It follows Standard Life's recent acquisition of Ignis Asset Management which boosted its presence in commercial property and bonds.
David Nish (pictured), group chief executive of Standard Life, said: 'This transaction provides our group and its shareholders with significant strategic and financial benefits. It accelerates our growth and reduces capital-intensity, while delivering substantial value today.'