The Edinburgh-based financial provider has entered into an agreement with a subsidiary of Phoenix Group Holdings to acquire fund manager Ignis, subject to approval from the Financial Conduct Authority.
Standard Life says the acquisition of Ignis will complement Standard Life Investments' organic growth and strengthen its strategic positioning. The combined business will offer a full range of investment solutions, including active management for institutional and wholesale clients, discretionary wealth management for high net worth private clients and outcome orientated products for maturing pension schemes and insurance companies.
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As part of the transaction, Standard Life Investments will enter into a strategic alliance with Phoenix through which Standard Life Investments will provide asset management services to Phoenix's Life Company subsidiaries, including the potential to manage future books of assets that Phoenix may acquire.
According to Standard Life, acquisition of Ignis enhances expertise and investment capability in key areas, including government bonds and liquidity. Standard Life Investments absolute return funds, including Global Absolute Return Strategies, Global Focused Strategies and Absolute Return Global Bond Strategies, will be bolstered with the addition of Ignis' Absolute Return Government Bond Fund and its complementary investment process.
Standard Life Investments will pay £390 million for Ignis, including regulatory capital. The consideration will be settled in cash from Standard Life Group's existing internal resources. Ignis has £59 billion of Assets Under Management as at 31 December 2013 excluding stock lending collateral. Ignis earned revenues of £150 million and generated EBITDA of £52 million in 2013.
Standard Life Investments has identified material cost savings from the integration of Ignis with Standard Life Investments' operating platform, exceeding £50 million by the third full year of ownership, it says. One-off implementation costs are expected to total around 1.5x on-going annual cost savings.
Keith Skeoch, chief executive of Standard Life Investments, said: "This acquisition is entirely complementary, deepening our investment capabilities, broadening our third party client base and strengthening our strategic position from which to develop a business in the rapidly developing liability aware market. Standard Life Investments continues to perform very strongly.
"Continuity of investment performance and commitment to client service and relationship management remain our key priorities, with migration and integration of Ignis taking place in a controlled manner under unified management from day one."
The acquisition of Ignis continues the delivery of our Group strategy to grow assets under management through enhancing our investment capabilities and expanding our offering to meet the changing needs of our customers. It will deliver enhanced earnings and cash generation and support future growth in revenues."
The transaction is anticipated to complete on or before 30 June 2014.