ABERDEEN Asset management has returned to the acquisition trail, paying out almost £140 million in cash on two deals which it says will complement its organic growth.
The wealth manager is bulking up its North American presence by buying out a small listed rival for £112m, a premium of £22m over the book value of Artio Global Investors.
Aberdeen is also buying a 50.1 per cent stake in private equity fund manager SVG Advisers for £17.5m. The business will be combined with Aberdeen’s own private equity arm to create a larger “fund of funds” business with almost £5 billion in assets under management.
The Scottish firm will pay for the deals from its substantial cash pile.
Finance director Bill Rattray said the SVG deal gave Aberdeen the chance to offer private equity products with enough history and scale to be of interest to investors. Its own relatively new private equity business was small, managing about £700m of assets. “It’s something which we know our clients are likely to find attractive, but we didn’t have a product with sufficient track record,” he said.
The agreement includes an option to buy the remaining 49.9 per cent stake from SVG Capital after an initial three years of joint ownership.
The US purchase appears much bigger, but Rattray says Artio has around $136m (£87m) in cash and seed investments on its balance sheet, which will be recovered by Aberdeen.
New York-based Artio manages about $14bn of assets, which will be added to the $60bn controlled by Aberdeen’s North American business, deepening its distribution network in the region and add to its existing fixed income capabilities.
Aberdeen said the transactions were consistent with its stated strategy to identify suitable, quality businesses to complement the group’s organic growth.
But Peter Lenardos, an analyst at RBC Capital Markets, said he did not believe the companies were good fits for Aberdeen, and called Artio a company “which has been in crisis for years”. He said the deal was better news for those selling than for Aberdeen, and that he had thought cash was to be returned to investors instead of being used to fund takeovers.
He added: “We believe that this double acquisition will likely limit extraordinary returns to Aberdeen shareholders.”
However, he retained his “outperform” rating on the shares.
Other analysts took a more positive view. Stuart Duncan at Peel Hunt said: “While small, the deals will be accretive to earnings and are expected to enhance the organic growth rate.”
Rattray said: “We are not actively seeking acquisitions, our style is to look at opportunities as and when they arise. We expect to continue to generate a lot of cash and that should go back to shareholders.”