Aberdeen Asset Management has signed a deal with Lloyds Banking Group to buy Scottish Widows Investment Partnership (SWIP) that will see its ethical and responsible assets climb to over £730m.
Once complete, the takeover will mean Aberdeen will be the largest independent fund manager in Europe.
The £550m transaction, announced on Monday, involves Lloyds taking on a 9.9% stake in Aberdeen. SWIP said the news meant it would be “better able to develop and commercialise further the strong capabilities that exist within [its] business”.
Aberdeen, which managed around £200 billion of funds before the deal, will see its assets grow by some £136 billion.
Shares in Aberdeen closed nearly 15% higher in London as a result of the transaction.
Martin Gilbert, chief executive of Aberdeen Asset Management said, “[The deal] strengthens our investment capabilities and adds new distribution channels; the acquisition of SWIP adds scale to our business across a range of asset classes; and it also introduces a strategic relationship with Lloyds Banking Group.
“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 in the Aberdeen group and we look forward to working with them to deliver value through this new strategic relationship.”
On its website, SWIP says it “manages a series of specialist ethical and environmental funds – totalling approximately £440m”. Craig Bonthron, co-manager of the SWIP Islamic Global Equity fund, which consults sharia law when choosing its investments, spoke to Blue & Green Tomorrow in March 2012.
This, added to the estimated £280m invested across Aberdeen’s three existing ethical and responsible funds, means the fund house now manages around £730m of responsible assets.
Despite this, Julian Parrott, a partner at financial advisory firm Ethical Futures, described the merge as “disappointing”.
“As both parties offer a screened fund, I presume that the offering may be reviewed”, he said.
“The expertise lies in differing places – Aberdeen on traditional ethical and SWIP on environmental issues. A win would be a larger quite of funds, but I fear that rationalisation is more likely.”
Parrott added, “Aberdeen’s star has been dimmed of late, with indifferent performance in the past few years and the move away from a dedicated manager, to moving the mandate to the global equities team. It will be interesting to see what the plans are for the screened funds.”
Lloyds, which is 32% taxpayer-owned, confirmed that while the ownership of SWIP would be transferred to Aberdeen, the group would retain control of Scottish Widows.
Note: this article was updated to include Julian Parrott’s comments.