Standard Life PLC (LSE:SL.) has won fresh backing from analysts after its £2 billion acquisition of Aegon UK, with RBC Capital Markets saying the deal should lead to higher shareholder returns.
The FTSE 100 life insurer said the transaction will expand its workplace pensions platform to £140 billion of assets, lifting it to the number two position in the UK defined contribution market.
RBC said the strategic rationale is “clear”, arguing the deal accelerates Standard Life’s shift towards capital-light earnings and improves its exposure to long-term growth in pensions and financial advice.
As other analysts have said, the acquisition is tipped to drive higher shareholder returns, forecasting share buybacks of £350 million a year alongside dividend growth of 5%.
While RBC noted the standalone financial returns look more modest, with an internal rate of return of around 10%, it sees a positive broader impact, as scale and lower funding costs improve the group’s valuation.
The share price target was lifted to 870p from 800p, with an 'outperform' rating reiterated, pointing to a total capital return yield of about 12% and a free cash flow yield of 18%.