Standard Life Plc climbed to a 10-month high after its investment arm agreed to buy Ignis Asset Management for 390 million pounds ($645 million), gaining 59 billion pounds of funds.
The acquisition from Phoenix Group Holdings will increase third-party assets under management by 64 percent and add to earnings per share in its first full year, the Edinburgh-based insurer said in a statement today. Standard Life Investments, which oversees 184.1 billion pounds, boosted its profitability target for earnings before interest, taxes, depreciation, and amortization to 45 percent by 2017.
Standard Life, Scotland’s biggest insurer, rose 7 percent to 400 pence, the highest since May last year. The firm has been repositioning itself as a mutual-fund manager and provider of pension products rather than traditional life-insurance policies.
“We view the acquisition as a positive move for Standard Life Investments in a market where size matters,” Barrie Cornes, an analyst at Panmure Gordon & Co., said in a note. “We view the key driver as cost synergies.”
Standard Life also said integrating Ignis will save more than 50 million pounds annually by the third year after the purchase. Standard Life Investments will manage future assets Phoenix accrues under a partnership agreement, passing on 15 percent to 20 percent of the revenue to Phoenix.
“This acquisition is entirely complementary, deepening our investment capabilities, broadening our third-party client base,” Standard Life Investments Chief Executive Officer Keith Skeoch said in the statement.
Phoenix, the U.K.’s biggest manager of life-insurance funds closed to new customers, rose 4.4 percent to 741.5 pence. The company, which also reported an increase in profit today, said it would use the proceeds from Ignis to consider acquisitions and repay debt, meeting a target two years early.
“The transaction has a compelling rationale,” Phoenix CEO Clive Bannister said in a telephone interview. “The reduction in gearing will accelerate our access to wider debt capital markets and strengthens our position as an acquirer of closed life funds.”
The purchase of Ignis is subject to regulatory approval and is due to be completed in the first half of 2014.
It’s the second acquisition by a Scottish firm of an asset manager in four months. Aberdeen Asset Management Plc agreed to buy Lloyds Banking Group Plc’s Scottish Widows Investment Partnership unit for 560 million pounds in November.