Aberdeen Asset Management's proposed purchase of Scottish Widows Investment Partnership (SWIP) from Lloyds Banking Group would be 'transformational' for the acquiring firm, says ratings agency Fitch Ratings.
The deal would reduce Aberdeen's dependence on global, emerging market and Asian equities by supplying substantial assets under management (AUM) in UK equity, fixed income and cash funds, says Fitch.
“This more balanced asset mix, coupled with more stable AUM from SWIP's exposure to in-house entities of its parent, Lloyds Banking Group, should ultimately translate into greater earnings stability,” the ratings agency says.
Aberdeen confirmed last week that it was in talks with Lloyds about acquiring SWIP and forming a strategic partnership with Lloyds.
Aberdeen said it would pay for the acquisition in newly issued Aberdeen shares and additional deferred cash payments depending on performance of the partnership.
Aberdeen's statement foreshadowed Fitch Ratings' analyst note by saying the proposed acquisition would add “scale and diversity” to its product range, and said the deal would provide substantial cost efficiencies.
However, Fitch sounded a word of caution. Although Aberdeen has completed successful acquisitions before, the SWIP deal would be the biggest yet and would expose the firm to integration risk. “These challenges may include exposure to client churn as there may be some overlap with SWIP's customer base,” Fitch says.
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