Standard Life Aberdeen PLC (LON:SLA) announced it is to sell its life assurance division to Phoenix Group Holdings PLC (LON:PHNX) for £3.24bn as the recently merged fund manager posted its first annual results.
The deal will see the FTSE 100-listed firm get a cash payment of £2.28bn and new shares in Phoenix equivalent to a 19.9% stake in the FTSE 250-listed firm and enhances a long-term strategic partnership with the closed-book life assurer.
READ: Lloyds pulls £109bn in funds from Standard Life Aberdeen on competition concerns
Standard Life Aberdeen said the sale of the capital-intensive business to Phoenix leaves it retaining the core of its fast-growing Retail channel.
It added that it also simplifies the group – formed by the £11bn merger of Aberdeen Asset Management and Standard Life last August - supporting the extraction of further efficiencies across the business.
Commenting on the transaction, Sir Gerry Grimstone, Standard Life Aberdeen’s chairman – who also announced that he would stand down as chairman at the end of 2019, said: "This transaction completes our transformation to a capital light investment business”.
He added: “This transaction represents excellent value for our shareholders, including a comprehensive and mutually beneficial strategic relationship entered into with Phoenix Group, a longstanding partner of the firm.
The acquisition, which Phoenix will part-finance with a £950mln right issue – will transform the mid-cap firm into one of Britain's biggest insurance companies. The sale is expected to complete in the third quarter of 2018.
Softens recent Lloyds blow
The sale to Phoenix comes in the wake of failed talks between Standard Life Aberdeen and Lloyds Banking Group (LON:LLOY) which ended last week with the bank and its Scottish Widows life assurance business deciding to withdraw £109bn of assets under management from the fund manager due to competition concerns.
Sky News later reported that the failed talks with Lloyds had concerned a merger of its insurance unit with that of the bank.
Commenting on the Transaction, Sir Gerry Grimstone, Chairman of Standard Life Aberdeen, said:
Standard Life Aberdeen’s 2017 results saw the group’s reported adjusted pre-tax profit rise to £492mln, up from £385mln in 2016, with pro forma fee-based revenue slipping slighting to £1.8912bn from £1.920bn.
The firm’s total funds under management as at 1 January 2017 were £580.6bn, albeit with net outflows of £37.3bn.