SL, Aberdeen merger: Will their infra units combine?

The future shape of the two companies’ infrastructure franchises has yet to be decided after their boards agreed to create the UK’s largest asset manager.

Standard Life is set to acquire rival Aberdeen Asset Management in a transaction valued at £3.8 billion ($4.7 billion; €4.4 billion) after the two firms announced they had agreed on the terms of the merger.

The deal, which remains subject to shareholder approval, would create the UK’s largest asset manager, overseeing assets worth £660 billion. The combined entity’s given moniker would retain both SL and Aberdeen’s names, the firms said, with their respective chief executives, Keith Skeoch and Martin Gilbert, to co-head the group.

Following completion, Aberdeen shareholders would own about 33.3 percent and Standard Life Shareholders would hold around 66.7 percent of the combined group on a diluted basis.

The companies hailed the all-share deal for bringing together two asset managers with “complementary, market-leading investment and savings capabilities which would deliver a compelling and comprehensive product offering for clients”.

SL and Aberdeen’s investment expertise spans developed and emerging market equities and fixed income, multi-asset, real estate and alternatives.

Aberdeen manages about $3.3 billion in direct infrastructure assets, across seven unlisted funds and associated vehicles. SL’s infrastructure unit, a newer outfit, is part of SL Capital, the firm’s private markets division. The team reached a final close on its debut infrastructure fund on £516 million last month.

It is unclear whether the two asset managers’ infrastructure franchises would continue to operate independently, under separate names, or whether they would be combined to form a single team.

“It is too early in the process to work out what will be in the best interests of both our fund and corporate investors. However, we are very excited by the potential scale of the new 'Standard Aberdeen' business” Gershon Cohen, head of infrastructure funds at Aberdeen, told Infrastructure Investor.

SL Capital stroke a similar note, simply stating that “It is too early to comment on this level of detail”.

Bill Rattray, of Aberdeen, is set to become chief financial officer and Rod Paris, of Standard Life, would be the combined entity’s chief investment officer. The latter’s board would comprise equal numbers of SL and Aberdeen directors, the companies said.

“We have always been clear that it is Standard Life's ambition to become a world-class investment company and that this would be achieved through continued investment in diversification and growth, coupled with a sharp focus on financial discipline,” Skeoch said. “We are therefore delighted that this announcement marks another important step towards achieving that ambition.”