31st Dec 2008 07:12
Aberdeen Asset Management PLC
ABERDEEN ASSET MANAGEMENT PLC
Proposed Acquisition of parts of Credit Suisse's Global Investors business
Summary
Aberdeen Asset Management PLC ('Aberdeen' or 'the Group')announces that it has entered into a definitive agreement with Credit Suisse Group AG ('Credit Suisse') to acquire certain fund management assets and businesses ('the Acquired Business') ('the Acquisition'), subject to shareholder and certain regulatory approvals.
The purchase consideration will be satisfied by the issue to Credit Suisse of a maximum of 240 million new ordinary shares in Aberdeen, equivalent to 24.97% of the enlarged Group's issued ordinary share capital, valued at £250 million based on the Aberdeen closing share price of 104.25 pence on 30 December 2008. The actual number of new ordinary shares to be issued to Credit Suisse will depend on the level of run-rate revenues delivered at the closing of the Acquisition, which is anticipated will take place on, or around, 30 June 2009 ('the Closing').
The assets under management ('AuM') the subject of the Acquisition were CHF75 billion (£40 billion) as at 30 November 2008, with associated run-rate revenues of approximately CHF220 million (£118 million) per annum and were this level of run-rate revenues to be delivered at Closing, the maximum purchase consideration of 240 million new ordinary shares would be payable.
The Acquired Business is a long-only traditional asset manager with a leading presence in Europe, Asia and Australasia. It offers a broad product range, diversified predominantly across fixed income, money market and equities, with a variety of investment styles that will be integrated into Aberdeen's investment processes. Its products are sold primarily to third party clients, with a significant minority of assets sourced through Credit Suisse's Private Banking division, one of the world's largest wealth managers.
Aberdeen has agreed an extension of the existing distribution agreement with Credit Suisse, to be signed on Closing. This will give Aberdeen greater access to the banking network of Credit Suisse.
The key benefits of the Acquisition for Aberdeen are:
the opportunity to achieve greater scale in certain markets where the Group already has a presence, such as the UK, Australia, Germany, Switzerland and Japan. The Acquisition will also strengthen Aberdeen's offering in certain product areas
greater access to the distribution network of both Credit Suisse and Credit Suisse's Private Banking division;
the introduction of another significant, long-term, quality shareholder, whose aims are aligned with Aberdeen's;
the strengthening of Aberdeen's balance sheet by the issue of new shares and a reduction in relative gearing as the Acquired Business is debt free;
substantial cost efficiencies and enhanced financial performance through the application of Aberdeen's efficient operating model to the Acquired Business; and
significant earnings enhancement (before any amortisation of intangible assets) from Closing.
Commenting on the Acquisition, Martin Gilbert, Chief Executive of Aberdeen, said:
"The acquisition confirms Aberdeen's position as a leading global asset manager and provides us with greater access to the distribution network of Credit Suisse and its Private Banking division, one of the world's largest wealth managers.
"This transaction fits perfectly within our strategy, a key part of which has been to make earnings enhancing acquisitions which give the business critical mass in our core competencies, complementing our organic growth.
"Given our proven track record of integrating businesses, we are well placed to ensure a smooth transition of the Credit Suisse assets to Aberdeen. We look forward to welcoming our new colleagues and clients, and also to welcoming Credit Suisse as a significant shareholder in Aberdeen. We believe that this transaction will be for the long-term benefit of all our shareholders."
Rob Shafir, CEO of Credit Suisse's Asset Management Division, said:
"We believe this transaction offers our clients a compelling opportunity, providing them with access to an enhanced suite of investment products provided by a premier manager that historically has had strong performance across many asset classes. It also enables us to maximize the value of our Global Investors business, as we announced we would do earlier this year, and benefit from our new partner's advantages of scale in a consolidating marketplace. "
Martin Hughes, Chief Executive of Toscafund, Aberdeen's largest shareholder said:
"Toscafund has already confirmed its support for this transformational acquisition, which has been made possible by the excellent operating platform offered by Aberdeen. Toscafund believes that the transaction is of clear benefit to the clients and shareholders of Aberdeen Asset Management and Credit Suisse."
A presentation for analysts and institutions will be held at 10.00 am on Monday 5 January 2009 at Aberdeen's offices at One Bow Churchyard, London EC4M 9HH.
JPMorgan Cazenove is acting as financial adviser, broker and sponsor to Aberdeen in connection with the Acquisition.
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Enquiries |
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Aberdeen Asset Management PLC Martin Gilbert Bill Rattray |
+ 44 (0) 20 7463 6000 |
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JPMorgan Cazenove Ian Hannam Piers Davison |
+44 (0) 020 7588 2828 |
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Maitland Neil Bennett Tom Eckersley |
+ 44 (0) 20 7379 5151 |
This summary should be read in conjunction with the full text of the following announcement (the 'Announcement').
This Announcement has been issued by and is the sole responsibility of the Company. No representation or warranty express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by JPMorgan Cazenove Limited or by any of its affiliates or agents as to or in relation to, the accuracy or completeness of this Announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any liability therefore is expressly disclaimed.
JPMorgan Cazenove Limited is authorised and regulated in the United Kingdom for the conduct of investment business by The Financial Services Authority and is acting, as financial adviser, broker and sponsor exclusively for Aberdeen Asset Management PLC and for no one else in connection with the Acquisition and will not regard any other person as its client in relation to the Acquisition and will not be responsible to anyone other than Aberdeen Asset Management PLC for providing the protections afforded to clients of JPMorgan Cazenove Limited nor for providing advice in relation to the Acquisition or any matter referred to herein.
Certain statements in this Announcement are forward-looking statements which are based on the Company's expectations, intentions and projections regarding its future performance, anticipated events or trends and other matters that are not historical facts. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Given these risks and uncertainties, prospective investors are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date of such statements and, except as required by applicable law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
ABERDEEN ASSET MANAGEMENT PLC
Proposed Acquisition of parts of Credit Suisse's Global Investors business
The Acquisition
Aberdeen Asset Management PLC ('Aberdeen' or 'the Group') announces that it has entered into a definitive agreement with Credit Suisse Group AG ('Credit Suisse') to acquire certain fund management assets and businesses ('the Acquired Business') ('the Acquisition'), subject to shareholder and certain regulatory approvals.
The purchase consideration will be satisfied by the issue to Credit Suisse of a maximum of 240 million new ordinary shares in Aberdeen, equivalent to 24.97% of the enlarged Group's issued ordinary share capital, valued at £250 million based on the Aberdeen closing share price of 104.25 pence on 30 December 2008. The actual number of new ordinary shares to be issued to Credit Suisse will depend on the level of run-rate revenues delivered at the closing of the Acquisition, which is anticipated will take place on, or around, 30 June 2009 ('the Closing').
The assets under management ('AuM') the subject of the Acquisition were CHF75 billion (£40 billion) as at 30 November 2008, with associated run-rate revenues of approximately CHF220 million (£118 million) per annum and were this level of run-rate revenues to be delivered at Closing, the maximum purchase consideration of 240 million new ordinary shares would be payable.
The Acquisition is conditional upon shareholder approval, the approval of the Financial Services Authority and certain other regulatory approvals and will close in two stages - first in Asia Pacific (excluding Japan) where completion is expected to occur on, or around, 30 April 2009 ('First Completion'); and then in the rest of the world where completion is expected to be on, or around, 30 June 2009 ('Closing'), with consideration payable in two stages in proportion to the level of run-rate revenues transferring at each stage on, or around, these respective dates.
Price adjustment mechanism
The final consideration agreed with Credit Suisse is up to a maximum of 240 million new ordinary shares equivalent to 24.97% of the enlarged Group's issued ordinary share capital (based on Aberdeen's issued ordinary share capital as at 31 December 2008 as enlarged by the Acquisition). The number of shares actually issued will be adjusted to reflect any decline in run-rate revenues between signing and Closing on the following basis:
o for the first 10% of any decline from base run-rate revenues of CHF220 million ('the Base Run-rate') there would be no adjustment;
o a decline of 30% from the Base Run-rate would reduce the consideration to 180.2 million new ordinary shares (20% of the enlarged Group), and for a decline of between 10% and 30% the consideration would be adjusted on a linear basis from 24.97% to 20% of the enlarged Group;
o for any decline in excess of 30% from the Base Run-rate, the consideration would be further adjusted from 180.2 million shares (20% of the enlarged Group) by decreasing the number of consideration shares by 2.5% for every 1% by which run-rate revenues decline beyond 30%;
o if the percentage decline in the Base Run-rate is greater than 50%, each party has the right to terminate the Sale and Purchase Agreement; and
o any decline from the Base Run-rate for the purposes of the price adjustment mechanism will exclude market movements.
Relationship with Credit Suisse
Aberdeen has agreed, following First Completion and the allotment of shares to Credit Suisse, but subject to certain legal and regulatory requirements, that Credit Suisse will be entitled to appoint a non-executive director to the Board of Aberdeen for a period of two years from the date of allotment. Thereafter, the right will endure if Credit Suisse's holding remains at 15% or more of Aberdeen's issued ordinary share capital. This right will lapse if Credit Suisse's holding falls below 15% of the issued ordinary share capital.
In addition, Credit Suisse has agreed inter alia to retain its entire holding for a minimum of twelve months from the date of allotment; to retain at least two thirds of its holding for two years; and to retain at least one third of its holding for three years.
Credit Suisse has agreed to ensure that neither it, nor any member of its group, will acquire 25% or more of the issued voting share capital of Aberdeen for a minimum of three years from Closing. So long as Credit Suisse's holding in Aberdeen remains at 10% or more of the total issued share capital, Credit Suisse has the right to participate in any new issues of shares by Aberdeen in order to maintain an equivalent holding in Aberdeen following such new issue. For the duration of the period that Credit Suisse holds any Aberdeen shares, Aberdeen has undertaken not to knowingly take any action which would result in Credit Suisse owning or controlling 25% or more of Aberdeen's total issued voting share capital. In calculating the 25% shareholding threshold, holdings of Aberdeen shares held by any member of the Credit Suisse Group for third parties on a discretionary basis (whether for investment or voting purposes) will be included in the aggregation.
The parties have also agreed to extend the existing distribution arrangements between Credit Suisse, Aberdeen International Fund Management Limited and Fortis Foreign Fund Service AG to those funds which are being acquired by Aberdeen as part of the Acquired Business. These arrangements will enable the Aberdeen Group to obtain a first-hand information exchange with the Private Banking Division of Credit Suisse and provide qualitative and quantitative feedback regarding the sales potential of new Aberdeen Group products.
Background to and reasons for the Acquisition
Aberdeen's strategy is to develop its investment capability and distribution platforms in order to grow and enter new markets and segments where the Board believes it has a sustainable competitive edge. Aberdeen has continued to pursue this strategy through both organic growth and a number of successful acquisitions, adding both scale and capabilities in key markets. The Acquisition is consistent with this strategy and provides the following benefits for Aberdeen shareholders and clients:
Scale and financial strength
o provides Aberdeen with greater scale in certain markets where the Group already has a presence, such as the UK, Australia, Germany, Switzerland and Japan. The Acquisition will also strengthen Aberdeen's offering in certain product areas
o strengthens Aberdeen's balance sheet by the issue of new shares and lowers relative gearing as the business being acquired is debt free
o introduces another significant, long-term, quality shareholder, whose aims are aligned with Aberdeen's
Enhanced distribution and client base
o further diversifies Aberdeen's existing client base: the Board believes that opportunities will also arise from the extension of distribution arrangements
o provides greater access to the distribution network of both Credit Suisse and Credit Suisse's Private Banking division through the extension of the distribution arrangements, as further described above
Significant new revenues with an attractive marginal cost/income ratio
o Aberdeen has identified the marginal operating costs required to operate the Acquired Business in an integrated manner, applying the Group's efficient operating model to the Acquired Business to deliver significant cost efficiencies and enhanced financial performance
o efficiencies will be delivered by utilising existing resources including third party administration arrangements in accordance with Aberdeen's proven policy
o Aberdeen expects the Acquired Business to operate on a marginal cost : income ratio of 35% - 40%
Value creation
o the opportunity to generate additional revenues through an improvement in distribution capability, with the potential for Aberdeen products to be accessible through Credit Suisse's platform
o significantly earnings enhancing from Closing and substantially value creative for shareholders
Information on the Acquired Business
The Acquired Business is a long-only traditional asset manager with a leading presence in Europe, Asia and Australasia. It offers a broad product range, diversified across fixed income, money markets and equities, with a variety of investment styles that will be integrated into the Aberdeen investment processes. Its products are sold primarily to third party clients, with a significant minority of assets sourced through Credit Suisse's Private Banking division, one of the world's largest wealth managers. The Acquired Business had assets under management of CHF75 billion (£40 billion) as at 30 November 2008 with associated run-rate revenue of approximately CHF220 million (£118 million) per annum. Under the terms of the sale and purchase agreement in respect of the Acquisition, the Acquired Business will have a minimum of £20 million of net cash on the balance sheet at Closing.
For the year to 31 December 2007, under Credit Suisse's ownership, the Acquired Business made a profit before tax of CHF 59 million (£25 million using the average exchange rate of 2.4012 for the year to 31 December 2007). Aberdeen expects to operate the Acquired Business from a much reduced cost base. As at 31 December 2007, the Acquired Business had gross assets of CHF 2,036 million (£906 million) held on the balance sheet.
The majority (by product) of the Acquired Business' AuM is held within collective investment vehicles including open-end funds domiciled in Australia, France, Germany, Luxembourg, Japan, the UK and the US. There are also a number of segregated mandates, and closed-end funds in the US.
The primary locations of the Acquired Business are London, Luxembourg and Sydney.
AuM by asset class (30 November 2008)
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CHF billion |
£ billion |
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Equities |
15.1 |
8.1 |
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Fixed Income |
29.5 |
15.8 |
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Money Market |
29.9 |
16.0 |
|
Multi-Asset |
0.4 |
0.2 |
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TOTAL |
74.9 |
40.1 |
AuM by mandate type (30 November 2008)
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CHF billion |
£ billion |
|
|
Mandates |
33.4 |
17.9 |
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Funds |
41.5 |
22.2 |
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TOTAL |
74.9 |
40.1 |
Migration of the Acquired Business
The intention is to migrate the Acquired Business onto Aberdeen's platform, including third party administration arrangements, which support similar products and instruments to those within the Acquired Business.
A number of fund managers and client-facing staff associated with the Acquired Business will transfer to Aberdeen at completion. Those who are based in London will move to Aberdeen's existing premises at One Bow Churchyard. Local operations around the world where both Aberdeen and the Acquired Business have a presence will be merged and based in a single office.
Aberdeen intends to promptly migrate and integrate the Acquired Business into its existing operations. Certain transitional services will be provided to Aberdeen by Credit Suisse in relation to the Acquired Business for up to 18 months following Closing.
Aberdeen expects the integration of the Acquired Business to improve Aberdeen's current fund management operating margin, and thereby contribute to an increase in the overall Group operating margin.
The Acquired Business will operate under the Aberdeen brand from Closing.
Aberdeen envisages that there will be one-off costs associated with the migration and integration of the Acquired Business of approximately £25m.
Financial effects of the Acquisition
The Board of Aberdeen expects the Acquisition to be significantly earnings enhancing from Closing. The Acquisition will also strengthen Aberdeen's balance sheet through the issuance of new shares and lower the relative gearing position as the Acquired Business will have a minimum of £20 million of net cash and no debt.
The Acquisition will provide the opportunity to generate additional revenues through an improvement in distribution capability, with the potential for Aberdeen products to be accessible through Credit Suisse's platform. It will further diversify Aberdeen's overall client base providing more opportunity to cross-sell its product range.
Aberdeen has identified the marginal operating costs required to operate the Acquired Business in an integrated manner, applying the Group's efficient operating model to the Acquired Business to deliver significant cost efficiencies and enhanced financial performance. These efficiencies will be delivered by utilising existing resources including third party administration arrangements in accordance with Aberdeen's proven policy. Aberdeen expects the Acquired Business to operate on a marginal cost/income ratio of 35% - 40%.
General Meeting
The Acquisition is conditional on, inter alia, the approval of Aberdeen shareholders at a General Meeting to be held in the first quarter of 2009, notice of which will be included in a Circular to be sent to shareholders in due course.
Irrevocable undertaking
Toscafund, Aberdeen's largest shareholder, has undertaken to exercise its voting rights in favour of the resolutions to be proposed at the General Meeting.
Current trading of Aberdeen
Aberdeen announced its annual results to 30 September 2008 on 1 December 2008. The Group earned clean profit before taxation of £95.1 million for the 12 months, compared to £94.3 million for the same period last year. Continued steady investment performance and a demonstrably robust investment process enabled the Group to win net new business of £1 billion.
Conditions within the asset management sector continue to be challenging. However, Aberdeen remains well positioned with a stable balance sheet, a strong range of core products and a well diversified global client base. The Group continues to make good progress in implementing sustainable cost reductions, reflecting the tougher market conditions. Assets under management at 30 November 2008 totalled £102.6 billion.
Dividends
The new ordinary shares issued in relation to the Acquisition will rank pari passu in all respects with the existing ordinary shares, including the right to all future dividends and other distributions declared, made or paid after the date of allotment and issue of the new ordinary shares, except that the new ordinary shares will not be eligible for dividends paid by reference to periods falling wholly prior to Closing.
Timetable to closing
Assuming all conditions are satisfied, Aberdeen currently expects the Acquisition to complete on, or around, 30 April 2009 in respect of the Asia Pacific (excluding Japan) business, and on, or around, 30 June 2009 in the rest of the world (i.e. the European, US and Japanese businesses).
Additional Information
JPMorgan Cazenove is acting as financial adviser, broker and sponsor to Aberdeen in connection with the Acquisition.
Unless otherwise stated in the Announcement, the exchange rate used is CHF1.8686 per £1 as at 30 November 2008 and sourced from Bloomberg.
|
Enquiries |
|
|
Aberdeen Asset Management PLC Martin Gilbert Bill Rattray |
+ 44 (0) 20 7463 6000 |
|
JPMorgan Cazenove Ian Hannam Piers Davison |
+44 (0) 020 7588 2828 |
|
Maitland Neil Bennett Tom Eckersley |
+ 44 (0) 20 7379 5151 |
NOTES TO EDITORS
Aberdeen Asset Management PLC
Aberdeen Asset Management PLC is an international investment management group managing assets principally on behalf of leading national and corporate pension funds, central banks and other financial institutions from its offices located around the world. The Group's areas of activity are chiefly equities, fixed income and property. Total Group assets under management and advice were £102.6 billion (€124.1 billion, $157.5 billion) as at 30 November 2008. For further information please visit www.aberdeen-asset.com
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