Standard Life‘s global investment management business Standard Life Investments has entered into an agreement with a subsidiary of Phoenix Group Holdings to acquire its asset management business, Ignis Asset Management Limited. The combined business will offer a full range of investment solutions, including active management for institutional and wholesale clients, discretionary wealth management for high net worth private clients and outcome orientated products for maturing pension schemes and insurance companies.
Standard Life plc today announces that its global investment management business, Standard Life Investments (Holdings) Limited (“Standard Life Investments”), has entered into an agreement with a subsidiary of Phoenix Group Holdings (“Phoenix”) to acquire its asset management business, Ignis Asset Management Limited (“Ignis Asset Management” or “Ignis”). The transaction is conditional upon, inter alia, approval from the Financial Conduct Authority.
The acquisition of Ignis Asset Management will complement Standard Life Investments’ strong organic growth and strengthen its strategic positioning. It will deepen its investment capabilities, broaden Standard Life Investments’ third party client base and reinforce its foundation for building a business in the rapidly developing liability aware market.
The combined business will offer a full range of investment solutions, including active management for institutional and wholesale clients, discretionary wealth management for high net worth private clients and outcome orientated products for maturing pension schemes and insurance companies.
As part of the transaction, Standard Life Investments will enter into a strategic alliance with Phoenix through which Standard Life Investments will provide asset management services to Phoenix’s Life Company subsidiaries, including the potential to manage future books of assets that Phoenix may acquire. The Phoenix Life Company Boards are supportive of Standard Life Investments as their investment manager of choice, reflecting Standard Life Investments’ strength and heritage in managing insurance assets.
Key benefits of the transaction
Deepens investment capabilities
• Acquisition of Ignis Asset Management enhances expertise and investment capability in key areas, including government bonds and liquidity
• Standard Life Investments has a leading suite of absolute return funds including Global Absolute Return Strategies, Global Focused Strategies and Absolute Return Global Bond Strategies. These will be expanded with the addition of Ignis’ Absolute Return Government Bond Fund and its complementary investment process
Broadens third party client base
• Adds to rapidly growing book of third party business, increasing third party assets under management to 64% of total and revenues to 81% of total
• Broadens Standard Life Investments’ insurance client base to include four additional companies under long-term contracts
Strengthens strategic position for rapidly developing liability aware market
• Combination of a broader third party client base in insurance asset management and additional investment capabilities will create a strong foundation for Standard Life Investments to develop solutions for the rapidly growing liability aware market
• Growth is expected over the short to medium term as defined benefit pension schemes mature and insurance companies worldwide seek to outsource asset management, creating a rich source of fixed income and absolute return mandates
Value creation for shareholders
• Acquisition of Ignis on attractive terms, reflecting a multiple of 2013 EBITDA of 7.5x before synergies
• Following integration, the transaction will help accelerate Standard Life Investments towards a new target EBITDA margin of 45%. It will enhance earnings per share from the first full year post acquisition (pre-amortisation and exceptional items)
Standard Life Investments will pay £390 million for Ignis, including regulatory capital. The consideration will be settled in cash from Standard Life Group’s existing internal resources.
Ignis is a top 15 asset manager in the UK with £59 billion of AuM as at 31 December 2013 excluding stock lending collateral. Ignis earned revenues of £150 million and generated EBITDA of £52 million in 2013.
Standard Life Investments has identified material cost savings from the integration of Ignis with Standard Life Investments’ operating platform, exceeding £50 million by the third full year of ownership. One-off implementation costs are expected to total around 1.5x on-going annual cost savings.
Protection is being provided through a price adjustment mechanism that will require Phoenix to repay a portion of consideration if assets or mandates associated with the Phoenix Life Companies are withdrawn in certain circumstances prior to the tenth anniversary of the transaction.
Commenting on the transaction, Keith Skeoch, Chief Executive of Standard Life Investments, said:
“This acquisition is entirely complementary, deepening our investment capabilities, broadening our third party client base and strengthening our strategic position from which to develop a business in the rapidly developing liability aware market. Standard Life Investments continues to perform very strongly.
Continuity of investment performance and commitment to client service and relationship management remain our key priorities, with migration and integration of Ignis taking place in a controlled manner under unified management from day one.”
David Nish, Chief Executive of Standard Life, said:
“Our Group strategy is built on a strong understanding of our markets and customers. We will continue to lead market thinking and identify opportunities as the landscape changes to move our business forward and drive value for shareholders.
The acquisition of Ignis continues the delivery of our Group strategy to grow assets under management through enhancing our investment capabilities and expanding our offering to meet the changing needs of our customers. It will deliver enhanced earnings and cash generation and support future growth in revenues.”
The transaction is anticipated to complete on or before 30 June 2014 and is conditional upon, inter alia, approval from the Financial Conduct Authority.
Fenchurch Advisory Partners is acting as exclusive Financial Adviser and JP Morgan Cazenove is acting as Corporate Broker to Standard Life.
Notes to editors
Standard Life Investments EBITDA margin
Historically Standard Life Investments has used EBIT margin as a key performance indicator. EBIT margin for year ended 31 December 2013 was 36.9%. EBITDA margin in 2013, which also excludes the impact of depreciation and amortisation totalling £1.8 million, was 37.3%.
Ignis Asset Management is the wholly-owned asset management subsidiary of Phoenix. It provides investment management services to Phoenix’s Life Companies as well as to third party clients, including retail, wholesale and institutional investors in the UK and overseas.
As at 31 December 2013, Ignis was responsible for managing £59 billion of assets (excluding stock lending collateral) including £44 billion of assets for Phoenix’s Life Companies and Holding Companies, and £15 billion of third party assets. Ignis also manages £7 billion of stock lending collateral on behalf of Phoenix’s Life Companies. Ignis generated IFRS pre-tax operating profits of £49 million in 2013, and had IFRS total assets excluding intangibles of £191 million and IFRS net assets excluding intangibles of £108 million as at 31 December 2013.
With offices in London and Glasgow, and approximately 360 employees as at 31 December 2013, Ignis Asset Management has investment capabilities across multiple asset classes organised into four investment business units and its former joint ventures, which have been restructured as a series of investments. The minority interest in Castle Hill Asset Management LLC will not be transferred to Standard Life Investments as part of the transaction, and will be retained by Phoenix.
About Standard Life*
Standard Life is a leading provider of long-term savings and investments. Established in 1825 and headquartered in Edinburgh, the company has around 8,500 employees internationally. Standard Life plc is listed on the London Stock Exchange and has approximately 1.3 million individual shareholders in over 50 countries around the world. At the end of December 2013 the Group had total assets under administration of over £244 billion, directly looking after around six million customers worldwide and supporting a further 16 million customers through its Joint Ventures.
With assets under management of £184.1 billion, Standard Life Investments is one of Europe’s leading investment houses. It is a wholly owned subsidiary of Standard Life plc. Headquartered in Edinburgh, Standard Life Investments maintains offices in a number of locations around the globe including Boston, Hong Kong, London, Beijing, Montreal, Sydney, Dublin, Paris and Seoul. In addition, Standard Life Investments has close relationships with leading domestic players in Asia, including HDFC Asset Management in India and Sumitomo Mitsui Trust Bank in Japan.
Phoenix Group Holdings has a Premium Listing on the London Stock Exchange and is a member of the FTSE 250 index.
The Phoenix Group is a closed life assurance fund consolidator that specialises in the management and acquisition of closed life and pension funds, and operates primarily in the United Kingdom. Measured by total assets, the Phoenix Group is the largest UK consolidator of closed life assurance funds. It has over five million policyholders and assets of £68.6 billion.
The Phoenix Group has four operating life companies which hold policyholder assets.
*All figures at 31 December 2013
About Fenchurch Advisory Partners
Fenchurch Advisory Partners LLP (“Fenchurch”), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for Standard Life plc (the “Company”) and no-one else in connection with the transaction. Fenchurch will not regard any other person as their respective clients in relation to the transaction and will not be responsible to anyone other than the Company for providing the protections afforded to clients of Fenchurch, nor for providing advice in relation to the transaction, the contents of this announcement or any transaction or arrangement referred to herein. No reliance may or should be placed by any person for any purposes whatsoever on the information contained in this announcement or on its completeness, accuracy or fairness. Fenchurch and the Company and their respective affiliates accordingly disclaim all and any liability whether arising in tort, contract or otherwise which they might otherwise have in respect of this announcement or its contents or otherwise arising in connection herewith.
J.P. Morgan Securities plc, which is authorised by the Prudential Regulation Authority and regulated in the United Kingdom by the FCA, is acting exclusively for the Company and no one else in connection with the transaction and will not regard any other person (whether or not a recipient of this document) as a client in relation to the transaction and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to the transaction or any other transaction, arrangement or matter referred to in this document.