Aberdeen Asset Management Buys Scottish Windows in $1.1B Deal

Aberdeen Asset Management bought Lloyds' fund management arm Scottish Widows for about 660 million pounds ($1.1 billion) on Monday, making it Europe's No. 1 listed stand-alone fund manager.

Aberdeen will pay with shares worth about 560 million pounds, or 9.9 percent of the company, Lloyds said, and assets under management will rise to 336 billion from 200 billion. Lloyds has agreed a one-year lock-up on the shareholding.

It will also pay 100 million pounds in cash over five years depending on how well Aberdeen manages various Lloyds assets.

Aberdeen shares rose more than 13 percent.

Analysts at Numis said the deal looked well priced for Aberdeen but they want to "seek clarity" on how much of Scottish Widow's assets will stay put and on the lock-up.

For Lloyds, the deal lifts its Core Tier 1 capital by 11 basis points from the 9.9 percent reached in the third quarter to a 10-percent target set by Britain's financial watchdog. Lloyds shares rose 0.9 percent.

"We are confident that this transaction will deliver considerable additional value to our expanded client base and this will therefore benefit our shareholders. I am delighted to welcome Lloyds as a major shareholder," Aberdeen Chief Executive Martin Gilbert said in a statement.

Led by Gilbert, Aberdeen has enjoyed a sharp rise in its assets since the financial crisis, buoyed by demand for its global emerging market equities funds and a flurry of acquisitions. Adding Scottish Widow's strength in fixed-income will provide diversification to its equities business.

Lloyds, which is 33 percent state owned, is selling off non-core assets to strengthen its balance sheet and focus on lending to British households and businesses.

It needs to plug an 8.6 billion pound shortfall identified by Britain's financial regulator in June to persuade the regulator to let it start paying dividends again next year.

Aberdeen also released full-year earnings on Monday slightly ahead of market forecasts. Net revenue jumped 24 percent in the year to September 30 to 1.08 billion pounds.

Underlying pre-tax profits came in 39 percent higher, and Aberdeen said it would pay a full year dividend of 16 pence per share, up from 11.5 pence last year.