Aberdeen Asset Management has today confirmed it is to buy Lloyds Banking Group's Scottish Widows Investment Partnership business, in an all-share deal worth £560m based on its Friday closing price.
The Herald revealed on Saturday that Aberdeen was poised to announce a takeover of SWIP for between £500m and £600m as early as today, having seen off competition from rival bidder Macquarie, the Australian investment bank.
The takeover of SWIP will see Aberdeen become Europe's biggest independent fund manager.
The deal will result in Lloyds holding a 9.9% stake in Aberdeen.
A further consideration of up to £100m in cash will be payable over a five-year period, depending on the growth in business generated from a long-term strategic asset management relationship being formed between Aberdeen and Lloyds.
Aberdeen manages around £200 billion of funds and is set to add another £136 billion when the acquisition of Edinburgh-based SWIP completes early next year.
The deal will see Aberdeen overtake Schroders as Europe's biggest investment house. Its shares jumped by more than 10% today.
Lloyds has been holding a six-month auction for SWIP - part of the bank's Scottish Widows insurance arm - as it sells off assets to shore up its balance sheet and focus on its UK retail and commercial banking businesses.
The group, which is 32% owned by the taxpayer, will continue to own Scottish Widows, the group's life, pensions and investment business.
Today's agreement will see a broad range of Aberdeen's investment funds sold through 1,300 Lloyds branches.
It is the latest step in the transformation of Lloyds under chief executive Antonio Horta-Osorio.
He will qualify for a long-term bonus worth £2.3 million this week if shares in the banking group hold steady.
The boss of the state-backed banking group will receive just over three million shares should the stock close above 73.6p on Wednesday.
Mr Horta-Osorio will not be able to sell them until 2018 under the incentive scheme. They were 75.6p today, at which price the bonus would have a paper value of around £2.3 million.
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