Standard Life has acquired financial provider Aegon UK for £2bn in a deal that will create one of the country’s largest retirement savings and income businesses with 16m customers.
Standard Life claims the group will be the largest by size with about £480bn in assets under advice (AUA).
The merger of the two groups will help Standard Life with its target to be the UK’s leading retirement and savings provider. It will also strengthen Standard Life’s cash, capital and earnings position.
The acquisition will be funded by a combination of cash, debt and shares in Standard Life, with Aegon becoming a “strategic shareholder and asset management partner.”
Neither has provided full details of changes that may occur, such as job losses or office closures, while the two groups are brought together. However, the Stock Exchange announcement today suggests that there will be recurring pre‑tax cost ‘synergies’ of £110m per annum, with over half delivered by end‑2029 and the remainder by end‑2031, primarily from “rationalisation of combined group operations and head office costs and alignment of operating platforms and proposition.”
The companies expect the total net merger cost savings to be £800m over a 10 year period.
Standard Life says the acquisition is set to increase group operating cash generation and IFRS adjusted operating profit by approximately £160m per annum and to deliver £0.4 billion of additional excess cash over the five years following completion.
The deal will also make Standard Life the UK’s second largest workplace pensions platform by assets and customers, the company says, and significantly increase its footprint in the pensions and savings market.
Andy Briggs, group CEO of Standard Life, said: “Our agreement to acquire Aegon UK significantly accelerates our vision to be the UK’s leading retirement savings and income business. We will be in an even stronger position to meet the evolving needs of our 16 million customers with enhanced digital, advice and distribution capabilities across Workplace and Retail, strengthening our standing in one of the world’s most attractive markets. Furthermore, the transaction accelerates our shift to capital-light whilst strengthening our cash, capital and earnings position to create increased value for shareholders.
“With financial wellbeing at the heart of everything it does, Aegon UK’s values and culture are aligned with our own. Together, we will not only be stronger, we will be better - helping our customers achieve better outcomes and greater financial security in later life. I look forward to welcoming everyone at Aegon UK to Standard Life in due course and working together to capture the huge potential in front of us.”
Lard Friese, Aegon CEO, said: “Standard Life is the right owner for Aegon UK: we share the same values and a strong commitment to customers, and together the businesses will create the UK’s largest retirement savings and income provider. The businesses are complementary and the combination offers an excellent outcome for Aegon UK’s customers and colleagues. Aegon’s shareholding will provide an opportunity to participate in the future success of the enlarged group.”
• Financial Planning Today Analysis: Today's deal, a surprise to many in the sector, brings together two middle-sized players and creates a much more formidable force. With both having many staff based in Scotland the prospects for savings, and potentially job cuts and office closures, is significant. Today's announcement was reasonably brief with much detail yet to be released but the acquisition makes sense. Standard Life, once heading for oblivion as a brand name, has been resurrected in recent years and mightily so. Once the deal is completed it will leapfrog others to become a much larger play in the UK retirement market, a position it has enjoyed before. Larger rivals such as Aviva will need to take note of Standard Life's comeback.