Fund manager mega-merger sparks deal fever

The £11 billion merger between Standard Life and Aberdeen Asset Management triggered a deal frenzy today as the City bet that a rival bidder could gatecrash the deal and hunted for more bid targets.

The nil-premium tie-up, which gives Aberdeen a third of the new company, creates a UK giant with £660 billion under management.

It comes as active fund managers come under increasing pressure from much cheaper “passive” index-linked funds, which are gaining market share.

Standard’s chief executive Keith Skeoch and Aberdeen counterpart Martin Gilbert — who will serve as joint chief executives — predcit £200 million in cost savings after the merger but stonewalled reports that 1000 of the combined group’s 9000 staff could go.

The City piled into shares in both firms today, with Standard up 21.8p, or 6%, to 400.3p and Aberdeen 13.2p, or 5%, higher at 299.6p.

As well as cost savings, analysts speculated that another bidder could enter the fray after Gilbert said Aberdeen had already considered a number of potential deals.

The firm has been hit by years of outflows, and burnt by its exposure to struggling emerging markets.

“There must be a reasonable likelihood of a counter-bid, for one or both of the parties, given accelerating consolidation in the asset management industry. With Standard Life the senior party, Aberdeen shareholders could well argue for a control premium,” Ben Cohen of Canaccord Genuity said.

Liberum’s Justin Bates said “we do not rule out a competing bid”. Aberdeen’s two biggest shareholders, Mitsubishi UFJ Trust and Lloyds Banking Group, have offered “non-binding” statements of support.

Deal hopes infected smaller players in the sector: Jupiter Fund Management rose 6.8p to 429.8p and Ashmore was up 6.1p at 366p.