Standard Life has sold its Canadian business to Manulife for £2.2 billion with the life insurer planning to pay out £1.75 billion of the proceeds to shareholders.
As part of the deal, Manulife will distribute Standard Life Investments' (SLI) funds into Canada, the US and Asia, in an arrangement that is expected to treble SLI's assets under management obtained through the two companies' existing partnership within three years.
Standard Life said the sale of its Canadian arm will strengthen its capital position and it expects to distribute £1.75 billion, equivalent to 73p per share, of the monies through a 'B/C share scheme'. This a way of making the payout more tax efficient with UK shareholders able to choose whether they receive their proceeds as capital or income. Following the deal, Standard Life said it plans to 'carry out a share consolidation'.
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.
'The proposed capital return of £1.75 billion , equivalent to 73p per share, will take the total amount of dividends and returns to shareholders since 2010 to 147p per share.
'It is a reflection of our strong growth that operating profit from the businesses we retain following the sale are substantially higher than the whole group reported in 2010.'
The Edinburgh-based insurer said the sale values its Canadian arm, which had around C$52 billion of assets under management, at a multiple of 19.5x on a price-to-earnings basis.
Standard Life grew its Canadian arm into the country's fifth biggest insurer, a far cry from 2009 when it was a loss-making division that the Scottish company was rumoured to be looking to offload.