Aberdeen Plots Share Raid For Lloyds Division

By Mark Kleinman, City Editor

One of the City's biggest asset managers is plotting a takeover of the fund management arm of Lloyds Banking Group that could result in the taxpayer-backed bank owning a sizeable stake in it.

Sky News has learnt that Aberdeen Asset Management is proposing an all-share deal to buy Scottish Widows Investment Partnership (SWIP), which manages more than £140bn on behalf of investors.

Aberdeen, whose chief executive, Martin Gilbert, appeared to rule out a bid for SWIP earlier this year, is one of two remaining bidders for the unit, which Lloyds has earmarked for sale as it continues to shed non-core businesses.

Its interest in a deal is nevertheless unsurprising given its history of acquiring rival fund managers and successfully integrating them. Aberdeen has more than £200bn of funds under management and a combination with the SWIP unit would significantly increase its scale.

Acquiring SWIP is likely to cost a buyer between £400m and £500m, with Antonio Horta-Osorio, Lloyds' chief executive, said to be holding out for a sum towards the upper end of that range.

Aberdeen's rival to buy SWIP, which is part of the Lloyds-owned insurance group Scottish Widows, is understood to be Macquarie, the Australian bank, although it remains possible that another bidder could yet emerge.

Royal Bank of Canada and Natixis are among the other asset managers to have expressed an interest in buying SWIP during the six-month auction.

Under Aberdeen's plans, which are understood to be at a preliminary stage, it would issue new shares to Lloyds if its offer is successful. The fund manager's market capitalisation of just over £5bn would therefore mean that Lloyds could potentially hold a stake of up to 10% in Aberdeen.

The two companies have held initial talks about a broader strategic alliance of which the SWIP deal would be the beginning, according to one insider.

Aberdeen has undertaken acquisitions using its shares as currency before, notably when it acquired the asset management arm of Credit Suisse, the Swiss banking group, in 2008. That deal resulted in Credit Suisse owning roughly 25% of Aberdeen, a shareholding that it has now offloaded.

The Scottish asset manager, well-known for its prominent advertising and commercial association with sailing regattas such as the annual Cowes Week, would cement a miraculous recovery from the chastening experience of the split capital scandal which rocked the City during the early part of the last decade.

Aberdeen's recent performance has been robust, with Mr Gilbert - who is also a director of BSkyB, the owner of Sky News - saying: "Aberdeen's performance during the past year, and particularly over the last three months, has demonstrated our core resilience. Our assets under management, balance sheet and profitability remain robust despite continuing market volatility. Aberdeen and our funds are well placed to navigate the difficult market environment ahead to deliver strong returns to our clients and investors."

Lloyds is expected to select a winning bidder for SWIP within weeks, although completion is unlikely until next year.

The bank, in which taxpayers now own a 33% stake, has sold numerous assets during the last two years as regulators pressure big lenders to bolster their capital reserves. Among the businesses it has sold are portfolios of shipping and property loans, a shareholding in Sainsbury's Bank, and chunks of St James's Place, the wealth manager.

Aberdeen and Lloyds declined to comment on Wednesday.

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