ABERDEEN Asset Management is poised to unveil a takeover of Lloyds Banking Group's Scottish Widows Investment Partnership business for between £500 million and £600m as early as Monday, according to industry observers.
A takeover deal would create a Scottish-headquartered asset management giant with total funds of about £350 billion, and enable Aberdeen to form a potentially lucrative and mutually beneficial alliance with Lloyds to sell its investment products through the bank's network.
Industry observers indicated yesterday that while it was believed there were still some issues to be resolved and a deal had not yet been signed, Lloyds was moving closer to finalising terms with Aberdeen, which is offering shares rather than cash to cover the initial purchase price. Sources believed that, in spite of the hurdles still to be overcome, a deal could be announced as early as Monday.
Aberdeen shares were hit earlier this week by talk that rival bidder Macquarie, the Australian investment bank, might win the day with a cash bid put at about £600m.
However, it is understood Bank of Scotland owner Lloyds is more keen on working together with Aberdeen, with the potential benefits stemming from a distribution alliance likely to be a key factor in this stance. Aberdeen is regarded as a real heavyweight among fund management houses in the UK.
Industry observers believe that Aberdeen, which had funds under management of £201.7bn at August 31, will have held firm on the level of its bid this week in spite of the noise in the market about stiff opposition from Macquarie.
Aberdeen's chief executive, Martin Gilbert, has made many bold acquisitions over the years which have enabled the investment house which he leads to become one of the biggest players in the UK. He is regarded in the industry as a shrewd operator when it comes to bidding battles.
Market talk that Macquarie was upping the ante in the bid battle for SWIP, which had funds under management of £145.9bn at the end of June, weighed heavily on Aberdeen shares on Tuesday and Wednesday.
Shares in Aberdeen fell from their 436.6p close on Monday to 406.9p by the end of Wednesday's session. But they rose to 419.2p on Thursday and yesterday added a further 7.6p to 426.8p.
Aberdeen's bid, while it comprises shares in terms of the initial consideration for SWIP, is expected to include potential deferred cash payments. The degree of success of the distribution alliance formed between Aberdeen and Lloyds will dictate the level of these deferred cash payments to the taxpayer-backed bank, if Mr Gilbert's charge wins the auction.
Ratings agency Fitch has noted that an acquisition of SWIP would enable Aberdeen to reduce its dependence on global, emerging market, and Asian equity management mandates, by boosting its presence in bonds and UK equities.
SWIP, which employs the bulk of its 500 staff in Edinburgh and also has employees in London and New York, had £64.2bn of fixed-income securities at June 30.
There has been speculation that Aberdeen might cut its enlarged workforce, in the event of a takeover of SWIP, by about 150. Aberdeen has a workforce of about 2200.
A spokeswoman for SWIP declined comment yesterday when asked about the bidding process.
"It is still something we are not commenting on," she said.
Aberdeen also declined to discuss the matter.
And a spokeswoman for Macquarie declined to comment.
Aberdeen shares rose sharply during October, climbing from a close of 368.9p on October 8. They finished at 425.6p on October 23, the night before Aberdeen confirmed to the stock market that it was in talks about a potential takeover of SWIP.
The Herald reported in late September that Aberdeen was being linked to a bid for SWIP.
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