City shows its approval for Aberdeen's Credit Suisse deal

Published on Monday 5 January 2009 20:20

SHARES in Credit Suisse surged yesterday as investors warmed to the Swiss bank's £250 million sale of its fund management arm to Aberdeen Asset Management last week.

Credit Suisse shares leapt more than 8 per cent, while Aberdeen Asset Management initially rose 4 per cent, before later closing down 2.5 per cent at 122.75p.

Despite yesterday's fall, the Scottish fund manager, which bought Deutsche Bank's asset management business recently, has seen its shares soar about a third since the latest deal was announced on New Year's Eve.

Dirk Becker, an analyst at Kepler Capital Markets, noted that the price paid by AAM in an all-share deal was just 0.5 per cent of the unit's 75 billion Swiss francs (40bn) under management. But he said Credit Suisse was right to have sold the unit.

He said in a research note: "Credit Suisse spent many years to rightsize its fund business and never got anywhere so selling it seems a good solution.

"The group will now concentrate on its strengths, such as alternative assets, emerging markets and the Swiss domestic business. Therefore, we believe this is a good strategic step and keep our 'buy' rating."

In early 2008, a similar transaction would have typically been priced at about 2 per cent of assets under management, analysts said. "That makes AAM's timing pretty good," said one.

Credit Suisse will not receive cash for its stake, but will obtain a near-25 per cent holding in AAM, although this may be lower and will depend on the final valuation of the transaction. Credit Suisse will also receive a seat on Aberdeen's board.

One fund management analyst said: "I think people are continuing to warm to this deal for both companies.

"For Aberdeen, it offers a significant increase in their funds under management, very good in itself in what are expected to be challenging times for stock markets."