Dealmaker Gilbert Saves Aberdeen With Merger to Cap a Careerby
Analysts pick over deal where Aberdeen is target, not buyer
Attention turns to whether firm’s ‘top dog’ can be a co-CEO
For a man who’s made a career out of doing deals, a merger was always likely to be Martin Gilbert’s way out of his company’s woes.
Speculation about Aberdeen’s future has swirled around the 61-year-old Gilbert since clients started pulling money in 2013. The market veteran resisted buyer interest, insisting as recently as May that Aberdeen was better off staying independent. And as cash leached from the money manager -- and a deal started to look inevitable -- many observers thought Gilbert’s firm would at least turn out to be the one doing the buying.
Now, in light of the all-share takeover by Standard Life which will see that company’s shareholders own 66.7 percent of the combined group, this belief in Aberdeen’s strength is starting to look misplaced to some.
“It tells you something about the confidence that management have looking forward when they’re prepared to fund a deal like this through shares,” said Guy Foster, head of research at London-based money manager Brewin Dolphin Holdings Plc. “If you felt very confident you would want to keep the value to yourself, in which case you would either gear up or pay cash for the shareholder.”
Gilbert built up Aberdeen via more than 40 acquisitions spanning 34 years, and in November considered buying Pioneer Global Asset Management, before abandoning the purchase because the price was too high. That same month he said he’d like to do a cross-border deal similar to Henderson Group Plc’s “smart” tie up with Janus Capital Group Inc., prompting the industry to anticipate a deal with a U.S. partner.
However, clients continued to pull money from Aberdeen. Fear of rising U.S. interest rates and political risks caused by Donald Trump’s presidential win soured sentiment toward emerging markets, capping 15 consecutive quarters of net outflows and threatening the money manager’s dividend.
Then the proposed merger by Standard Life, led by Gilbert’s friend and fishing partner Keith Skeoch, gave Aberdeen the scale that it sought without much overlap on investment strategy. Gilbert told reporters on Monday that “while we had a very good future if we wanted as an independent company,” he did the deal “because we genuinely believe that a combined company will be better.”
“Aberdeen has struggled,” Citigroup Inc. analyst Haley Tam wrote in a report after the talks between the two companies were announced. “Diminished earnings power means we forecast Aberdeen will cut its dividend this year. But, a merger with Standard Life would alleviate many of these headaches.”
Standard Life has also suffered outflows, in common with many firms in an industry that’s battling to protect market share from cheaper passive funds while pay for mounting regulation. Both merger partners were among the top-five firms in Europe with the biggest redemptions last year, according to data from Morningstar Inc.
While analysts and management alike have called the merger “complementary,” views are mixed as to whether this is the best deal for Aberdeen’s shareholders, who will end up with only a 33.3 percent stake in the combined group.
Based on certain assumptions, RBC Capital Markets analyst Peter Lenardos estimated the deal means a 17 percent cut to Aberdeen’s dividend. Barclays Plc said some investors may have been looking for a cash element in the offer.
The deal prices Aberdeen at Friday’s share price; Jefferies Group’s Phil Dobbin says that while a nil-premium merger means investors are no better off, the deal does at least underpin the current stock value.
Aberdeen shares rose for seven of the past eight days, leaving them up 18.5 percent from a seven-month low set in February.
Now that the M&A speculation surrounding Aberdeen has been settled, the focus will turn to Gilbert’s future -- and whether having two CEOs at the helm of an $805 billion asset manager will really work out.
“I wouldn’t be surprised to see Martin step down after a year or so,” said John Spiers, CEO of financial adviser EQ Investors in London. “After being top dog for so long I doubt if he’ll enjoy sharing power.”