Standard Life Investments strengthens strategic position through acquisition of Ignis Asset Management
26 March 2014
- Acquisition of Ignis Asset Management by Standard Life Investments for £390 million
- Complements strong organic growth at Standard Life Investments
- Enhances Standard Life Investments’ strategic positioning through deepening investment capabilities and broadening third party client base
- Strengthens foundation for building a business in the rapidly developing liability aware market
- Standard Life Investments will target an enhanced EBITDA margin of 45% by 2017
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 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 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.”
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.”
“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.