Standard Life shares surge as Manulife Financial buys Canadian unit
Published 05/09/2014 | 02:30
Standard Life shares jumped the most in more than three years after the insurer sold its Canadian business to Manulife Financial for CAD$4bn (Canadian dollars) (€2.83bn) with plans to return cash to shareholders.
Shares rose as much as 11pc, the biggest intraday gain since 2011, during trading in London. Scotland's largest insurer, based in Edinburgh, said late Wednesday that it will return £1.75bn (€2.2bn) of the proceeds to investors.
Standard Life has got "a full price of nearly 20 times earnings for one of its least attractive assets," said Alan Devlin, an analyst at Barclays. "In our view, all three of the large Canadian life insurers are likely to have been interested."
Standard Life chief executive David Nish (54) has been working to build the company's asset-management operation while cutting reliance on businesses that require more capital.
Earlier this year, the company bought Ignis Asset Management from Phoenix Group Holdings, adding £59bn of funds.
The Manulife deal values the business, which has CAD$52bn in assets under management, at 19.5 times estimated 2014 operating earnings, according to the statement.
"This is a significant transaction," Mr Nish said on a conference call. "It reduces our capital requirements and allows us to realise fully the value of the business for our shareholders."
As part of the deal, Manulife agreed with Standard Life Investments to offer funds to clients in Canada, the US and Asia. Assets under management are forecast to triple over the next three years from $5.6bn, Mr Nish said.
The chief executive said the sale would be earnings accretive with the remaining proceeds from the sale used for "other investment opportunities." Standard Life Investments boss Keith Skeoch said the firm is planning to set up an office in Toronto for institutional clients.