LONDON - Royal Bank of Scotland (RBS) has agreed to sell non-core asset management businesses to funds firm Aberdeen as part of its overhaul following the government rescue.
Aberdeen Asset Management will pay 84.7 million pounds ($135 million) to acquire fund of hedge fund and multi-management businesses from the 84 percent state-owned bank.
This transaction represents another step in our plan to restructure RBS around its core customer franchises, Chief Financial Officer Bruce Van Saun said in a statement.
The transaction is expected to be completed by the end of the first quarter.
RBS Chief Executive Stephen Hester is reversing the decade-long acquisition spree of his predecessor, Fred Goodwin, which ended with the biggest rescue bailout for any bank in the world.
RBS is also looking to sell its 51 percent stake in commodities joint venture RBS Sempra and together with its partner Sempra Energy has received bids from a trio of banks worth nearly $4 billion, according to sources.
Aberdeen is taking over 13.5 billion pounds ($21.53 billion) worth of assets and will keep on the 65-strong RBS teams at the divisions.
The fund management company said it has successfully placed 90 million shares with institutions at 132 pence each, raising 119 million pounds to fund the acquisition.
Cash not employed to finance the deal will be used to bolster Tier 1 capital ratios, a spokesman said.
Aberdeen said it had also entered into a distribution agreement with RBS Wealth Management for a minimum of five years. The deal gives Aberdeen a sales route through RBS' private client franchise, including RBS's private banking arm Coutts in the United Kingdom.
Our client base are the Coutts of this world, the family offices of this world, said Aberdeen's chief executive, Martin Gilbert.
The deal also makes good on a long search by Aberdeen for exposure to hedge funds, a sector that Gilbert reckons is once again appealing to investors.
What happened last year was exceptional and I think the long term trend of investing in hedge funds is going to continue, Gilbert told Reuters.
Analysts at Singer Capital Markets said they expected the deal, and particularly the Coutts link, to add about 2 to 3 percent to published earnings estimates.
Altium Securities said the transaction was strategically important for Aberdeen, while Noble said the valuation was attractive, but the scope for cost synergies looked limited.
Aberdeen said in a separate statement on Friday that it had assets totaling 144.1 billion pounds at December 31 2009. The figure was dampened by net outflows in the first quarter of 2.6 billion, which the company said had mostly come from lower margin products.
Aberdeen's shares were down 2.6 percent at 135 pence by 1052 GMT, when RBS was off 3 percent at 34.73 pence. The FTSE 100 was down 0.05 percent at 5524 points.
(Additional reporting by Paul Hoskins; Editing by John Stonestreet, Greg Mahlich)