British fund manager Aberdeen Asset Management has unveiled two acquisitions, a U.S. fund manager and a 50.1 percent stake in an international private equity business, to buy its way into new markets. Aberdeen is to buy New York-based asset management firm Artio Global Investors for about $175 million, or $2.75 per share, and the stake in SVG Advisers for 17.5 million pounds ($27 million).
(Reuters) – British fund manager Aberdeen Asset Management (ADN.L) has unveiled two acquisitions, a U.S. fund manager and a 50.1 percent stake in an international private equity business, to buy its way into new markets.
Aberdeen is to buy New York-based asset management firm Artio Global Investors (ART.N) for about $175 million, or $2.75 per share, and the stake in SVG Advisers (SVGA) for 17.5 million pounds ($27 million).
The deals were part of a cautious strategy of expansion through bolt-on acquisitions and did not mark the start of an aggressive buying spree, chief executive Martin Gilbert said.
“Our preference is to do small infill acquisitions that enhance earnings per share,” Gilbert told reporters on Thursday.
“Both deals appear sensible. In particular, the Artio goes some way to address a strategic imperative for Aberdeen; namely to build its U.S. distribution capabilities,” Peel Hunt analysts said in a note to clients.
“A key question now must be whether these deals are one-off and opportunistic or whether this marks a shift in strategy back towards acquisitions?”
The price being paid for Artio was a 34 percent premium to Wednesday’s closing price. Aberdeen shares were up 2.0 percent to 424.5 pence at 6:10 a.m. ET.
Gilbert said Artio, which has $14.3 billion in, mainly, fixed income assets, will add scale and distribution channels to Aberdeen’s existing business in the United States, “a priority growth market”.
While Artio manages $4.5 billion of international global equities, Gilbert said he expected much of this to leave and Aberdeen had targeted the firm for its fixed income business.
“I think we have a very good track record in global equities but the way we like to look at things is to take a prudent view: the bulk of Artio’s international equities will go out the door. Whatever we keep will be a bonus for us,” he said.
The deal should be earnings enhancing from the outset, Aberdeen said. Gilbert said while Artio fixed income management teams will join Aberdeen, there would be job losses in support functions.
Aberdeen’s deal to buy into SVGA includes an option for it to buy, or for current owner SVG Capital (SVI.L) to sell, the remaining 49.9 percent in three years for 20-35 million pounds.
SVGA has about 4 billion pounds ($6.2 billion) assets under management which will be combined with Aberdeen’s private equity capability to create a private equity fund of funds business with assets of almost 5 billion pounds.
Gilbert said Aberdeen would have been prepared to carry out a full acquisition and he intended to exercise the option to buy the remainder. “I suspect SVG thought it was probably better from their point of view to sell us 50.1 percent.”
Speaking to Reuters after SVG Capital reported a 16 percent increase in net asset value per share, its chief executive Lynn Fordham said the deal, as structured, was the best option for its investors.
“For our investors, it is a good transitional period, to get the benefit of the upside for a good period of time and give us some influence over the alliance given we give the private equity expertise and Aberdeen bring the distribution,” she said.
The SVGA and Artio deals are expected to close respectively in the first half of 2013 and by the end of the second quarter or early in the third quarter of 2013.
J.P Morgan is acting as financial adviser and corporate broker to Aberdeen on the Artio acquisition and Willkie Farr & Gallagher LLP is acting as Aberdeen’s U.S. legal adviser.
(Writing by Chris Vellacott,; Editing by Dan Lalor)