STANDARD Life Investments (SLI) today confirmed the £390 million acquisition of Ignis Asset Management, a move seen as pivotal in moving the group further from its life and pensions roots.
Chief executive Keith Skeoch said it would provide a springboard for SLI to accelerate its growth and diversification plans.
He expects it to take on more third party mandates and make bigger inroads into a $1 trillion (£600 billion) global market to manage money for insurance companies. He said the deal would help boost its margins beyond previous forecasts.
But he also confirmed that an unspecified number of jobs will be lost at Glasgow-based Ignis as it seeks £50 million of cost savings from the cash deal.
Ignis, a subsidiary of Phoenix, employs 400 staff, more than half of them in Scotland. Some are expected to transfer to SLI, which will need to fill 200 vacancies over the next 18 months, but they may not necessarily be offered jobs in Edinburgh. The group has offices worldwide and Skeoch repeated a warning from the group last month that the referendum campaign will continue to hang over the company’s plans and influence where the Ignis work is relocated.
“We are keen to stress that we very much see this deal as a strategic accelerant for us. We have a long track record of delivering strong growth,” he said. SLI had looked at making acquisitions in the past, but the valuations were too high.
“One of the things we have always said we wanted to do was to diversify and deepen our capability,” he said. Ignis would complement SLI in such areas as government bonds.
The firm believes the acquisition at 7.5 times historic earnings before interest, taxation, depreciation and amortisation (Ebitda) is “a decent price”. On existing growth plans, SLI expected the Ebitda margin to grow from 37 per cent to more than 40 per cent. The cost savings from the Ignis deal will add a similar rate of growth, taking the margin to about 45 per cent.
Ignis is a top 15 asset manager in the UK and will add £59bn of assets under management to SLI’s £184bn. Last year, Ignis earned revenues of £150m and generated Ebitda of £52m.
Shore Capital analyst Eamonn Flanagan said the deal “appears an attractive proposition” for Standard Life as it moves towards the asset management model. But it made it less likely that special dividends would be on the cards in the short term.
On the jobs situation, Skeoch said he could not provide details or say what the net effect would be of job losses and vacancies filled. “It is difficult to know at the moment. We know there will be job losses to get £50m of cost savings, but there are jobs to be filled.” Asked if the Glasgow office would close, he said: “I don’t know yet.”
He said: “Where the work goes will depend on the economy and may depend on how things turn out in September [the independence referendum]. My focus is on growing a global operation. It is inevitable that the referendum will be a factor in where the work goes.”
As part of the transaction, SLI will enter into a strategic alliance with Phoenix to provide asset management services to Phoenix’s Life Company subsidiaries, including the potential to manage future books of assets that Phoenix may acquire.