Standard Life Aberdeen PLC (LON:SLA) will increase capital returns after receiving an extra £800mln in cash for the sale of its life assurance division, analysts at Deutsche Bank predict.
The company in February announced that it was selling the life assurance business to Phoenix Group Holdings PLC (LON:PHNX) for £3.24bn.
READ: Standard Life Aberdeen seals £3.24bn life assurance sale to Phoenix a week after Lloyds funds withdrawal blow
“It has subsequently become clear that the group is receiving an extra £800mln of cash out of the deal over and above the formal proceeds from the sale itself,” Deutsche Bank said.
“The upshot from this - alongside a tightening up of another assumption we had made - is that we now lift our assumed capital return to £1.6bn (equivalent to almost 15% of the current market cap).”
The bank raised its rating on the stock to ‘buy’ from ‘hold’ and lifted its target price to 440p from 410p. It also increased its earnings per share estimates for 2020 by 10%.
READ: Lloyds pulls £109bn in funds from Standard Life Aberdeen on competition concerns
Standard Life Aberdeen’s decision to sell the business came after Lloyds Banking Group PLC (LON:LLOY) decided to withdraw £109bn of assets under management from the fund manager due to competition concerns.