Disposal

RNS Number : 7955Q

Standard Life plc

04 September 2014

 



Standard Life plc

3 September 2014

Accelerating growth through the sale of Standard Life's Canadian business for £2.2bn, new global asset management collaboration agreement and return of capital to shareholders of £1.75bn (equivalent to 73p¹ per share)

Standard Life plc ("Standard Life" or the "Group") today announces the sale of its Canadian business, comprising Standard Life's Canadian long-term savings and retirement, individual and group insurance business (Standard Life Financial Inc.) and Canadian investment management business (Standard Life Investments Inc.), to The Manufacturers Life Insurance Company ("MLC"), a subsidiary of Manulife Financial Corporation ("Manulife") for a total cash consideration of C$4.0bn (equivalent to £2.2bn) at closing (the "Sale"). Standard Life's global asset management business, Standard Life Investments, has also entered into a global collaboration agreement with Manulife (the "Global Collaboration Agreement"). Following completion of the transaction, Standard Life expects to return £1.75bn (equivalent to 73p¹ per share) of capital to shareholders by way of a B/C share scheme.

The Board intends to complete the return of capital by way of a B/C share scheme to give Standard Life shareholders based in the UK the flexibility to receive their proceeds as income or capital. Following the return of capital, Standard Life intends to carry out a share consolidation.

The Sale is another major step in furthering Standard Life's strategy to build a global investment  solutions business, accelerating the growth profile of the Group through: focusing on its market-leading fee-based investment management and savings businesses; reducing Standard Life's exposure to spread/risk income; and advancing Standard Life Investments' global distribution and growth prospects through wider collaboration with Manulife. The Sale, the capital return and Standard Life Investments' strengthened relationship with Manulife are consistent with the Group's simple business model: increasing assets, maximising revenue and lowering unit costs while optimising the balance sheet.

Key features of the Sale are:

·   Cash proceeds of C$4.0bn achieve highly attractive value for Standard Life shareholders; the Sale price represents a P/E multiple of 19.5x² and a P/BV multiple of 1.9x³ and generates a one off IFRS gain on sale for Standard Life of £1.2bn⁴. The Sale price reflects the strong performance of the Canadian business following its strategic repositioning in recent years and the benefits Manulife can derive from the combination

·   Global Collaboration Agreement with Manulife deepens access to global markets for Standard Life Investments; Manulife will seek to distribute Standard Life Investments' funds into Canada, the US and Asia, which is expected to more than treble total assets under management ("AuM") distributed by Manulife within three years, building on its existing, highly successful relationship with John Hancock, the US unit of Manulife, and extending Standard Life Investments' exceptional record of growth. Following the Sale and the acquisition of Ignis earlier this year, Standard Life Investments will manage £156bn of third party AuM globally, 174% up from the start of 2010.

·   Further strengthens Standard Life's financial position, enabling an expected £1.75bn return of capital to shareholders; the planned return of capital to shareholders follows the special dividend of £302m in respect of 2012, and together with regular dividends will represent a total distribution to shareholders of £3.5bn or 147p⁵ per share since 2010

·   Enhances Standard Life's growth, earnings and cash profile; the Sale enhances the Group's medium-term earnings profile and the Sale and return of capital, when taken together with the acquisition of Ignis Asset Management ("Ignis") announced earlier this year, is expected to be accretive to Group operating earnings per share⁶. Following the proposed share consolidation, the Sale and capital return together are expected to be broadly neutral to operating earnings per share⁶.

·   Standard Life intends to maintain its progressive dividend policy; following the proposed return of capital and share consolidation, it is the Board's intention that Standard Life's progressive dividend policy of growth in dividend per share will be maintained

Manulife is a leading insurance and wealth management business in Canada and is well-positioned to serve the customers and clients of our Canadian business. Standard Life's award-winning global investment expertise will continue to be available to customers and clients through the expanded relationship with Manulife.

Commenting on the Sale, David Nish, Group Chief Executive of Standard Life, said:

"This transaction provides our Group and its shareholders with significant strategic and financial benefits. It accelerates our growth and reduces capital-intensity, while delivering substantial value today.  The proposed capital return of £1.75bn , equivalent to 73p¹ per share, will take the total amount of dividends and returns to shareholders since 2010 to 147p⁵ per share.  It is a reflection of our strong growth that operating profit from the businesses we retain following the sale are substantially higher than the whole Group reported in 2010.

"We have transformed our Canadian operations into a business which has consistently delivered strong results, contributing to the overall success of the Group. As a result, the Canadian business is now a much more attractive proposition and the Sale allows us to realise fully the value of the business for our shareholders.

"Manulife's presence in, and knowledge of, the Canadian market ensures they are ideally positioned to continue to support our customers and clients in Canada and drive the business forward. The expanded relationship with Manulife and Standard Life Investments also continues to deepen our access to distribution globally."

The Sale constitutes a Class 1 transaction for the purpose of the Listing Rules and is conditional upon the approval of Standard Life's shareholders at a General Meeting. The transaction is anticipated to complete in Q1 2015 and is also conditional upon, inter alia, approval from certain Canadian regulatory authorities, including the Canadian Competition Bureau.

A circular containing further details on the Sale, including the notice of the General Meeting to seek Standard Life shareholders' approval for the Sale, is expected to be sent to shareholders in September 2014.

International newswires and online publications

An international conference call for newswires and online publications will take place on 3 September at 17:30 (EST) / 22:30 (UK time). Participants should dial [phone] and quote Standard Life. A replay facility will be available for seven days after the event. To access the replay please dial [phone] and use pass code 5537183#.

Investors and Analysts

A conference call for investors and analysts will take place on 4 September at 11:00 (UK time). Participants should dial [phone] and quote Standard Life. There will be a facility to ask questions at the end of the presentation. A presentation is available on the website. A replay facility will be available for seven days after the event. To access the replay please dial [phone] and use pass code 2430551#.

For further information, please contact:

Media Enquiries	Investor Enquiries
Barry Cameron Group Head of Corporate Communications Standard Life plc [phone]* [phone] email: [e-mail]	Lorraine Rees Investor Relations Director Standard Life plc [phone]* email: [e-mail]
Steve Hartley Senior Media Affairs Manager Standard Life plc [phone]* [phone] email: [e-mail]	Jakub Rosochowski Investor Relations Senior Manager Standard Life plc [phone]* [phone] email: [e-mail]
Susanna Voyle Tulchan Communications LLP [phone]* [phone] email: [e-mail]	Neil Longair Investor Relations Analyst Standard Life plc [phone]* [phone] email: [e-mail]

* Calls may be monitored and/or recorded to protect both you and us and help with our training. Call charges will vary.

J.P. Morgan Cazenove

Sole Financial Adviser, Sole Sponsor and Joint Corporate Broker

Simon Pilkington

Edward Squire

[phone]

Deutsche Bank

Joint Corporate Broker

James Agnew

[phone]

Forward-looking statements

This announcement contains certain "forward-looking statements", including with respect to certain of Standard Life's plans and its current goals and expectations relating to its future financial condition, performance, results, strategy and objectives. Statements containing the words "believes", "intends", "should", "expects", "plans", "pursues", "seeks" and "anticipates" (or negatives thereof), and variations thereof or words of similar meaning, are forward-looking. By their nature, all forward-looking statements involve assumptions, risk and uncertainty because they relate to future events and circumstances which are beyond Standard Life's control including, among other things, UK domestic and global economic and business conditions, market related risks such as fluctuations in interest rates and exchange rates, and the performance of financial markets generally; the policies and actions of regulatory authorities, the impact of competition, inflation and deflation; experience in particular with regard to mortality and morbidity trends, lapse rates and policy renewal rates; the timing, impact and other uncertainties of future acquisitions or combinations within relevant industries; and the impact of changes in capital, solvency or accounting standards, and tax and other legislation and regulations in the jurisdictions in which Standard Life and its affiliates operate. As a result, Standard Life's actual future financial condition, performance and results may differ materially from the plans, goals and expectations set forth in the forward-looking statements and no assurances can be given that the forward-looking statements in this announcement will be realised. No representation or warranty is made as to the achievement or reasonableness of such forward-looking statements.

Any forward-looking statements made herein speak only as of the date they are made. Except as required by the UK Financial Conduct Authority, the London Stock Exchange or applicable law, Standard Life expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this announcement to reflect any change in Standard Life's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. No statement in this document is intended as a profit forecast or profit estimate.

J.P. Morgan Limited (which conducts its UK investment banking activities as J.P. Morgan Cazenove), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for Standard Life and for no one else in connection with the Sale and will not regard any other person (whether or not a recipient of this document) as a client in relation to the Sale and will not be responsible to anyone other than Standard Life for providing the protections afforded to clients of J.P. Morgan Cazenove or for affording advice in relation to the Sale, the contents of this document or any transaction, arrangement or other matter referred to in this document.

1.    Overview

Standard Life has entered into an agreement with respect to the sale of Standard Life Financial Inc. (the "Canadian long-term savings business") and Standard Life Investments Inc., comprising Standard Life's Canadian long-term savings and retirement, individual and group insurance and investment management businesses (together the "Canadian business"), for total cash consideration of C$4.0bn (£2.2bn) payable on completion of the sale. The principal terms of the agreement are described in more detail below. The Sale is conditional upon the approval of Standard Life's shareholders at a General Meeting, and is also conditional upon, inter alia, approval from certain Canadian regulatory authorities, including the Canadian Competition Bureau.

2.    Background to and reasons for the Sale

Standard Life's global investment expertise supported by its own distribution and strategic alliances globally means it is ideally positioned to deliver value for customers and clients and grow returns for shareholders. The Group's business model remains unchanged: increasing assets, maximising revenue and lowering unit costs while optimising the balance sheet.

Standard Life has been present in Canada for over 180 years and the Canadian long-term savings business is one of the oldest and most successful in the country. In recent years, management has been pursuing a strategy to re-orientate the Canadian long-term savings business towards a less capital intensive, fee-based revenue business, which has been consistent with the Group's overall strategy.

Excellent progress has been made against this strategy. Total AuA of the Canadian long-term savings business was C$52bn at 30 June 2014, with fee-based AuA of C$33bn, up 10% over the last six months. Operating profit before tax in H1 2014 was £69m, up 37%, with fee-based revenue up 21% compared with H1 2013 (both in constant currency). Disciplined cost management has allowed continued investment for growth in fee-based business without compromising profitability. The Canadian long-term savings business has also had a strong track-record of cash generation for the Group, with cumulative net dividends of C$1,054m paid since 2010.

The board of directors of Standard Life (the "Board") believes that the corporate pensions and retail savings markets in Canada are attractive but highly competitive, where a broad offering, strong distribution and low unit costs are increasingly critical to continued success. The Board believes the Sale to a domestic party that can fully benefit from the combination with the Canadian business is more likely to maximise value for Standard Life shareholders than retaining the business and pursuing an independent strategy in Canada.

The Sale includes the disposal of Standard Life Investments Inc., reflecting its operational interdependence with the Canadian long-term savings business.

The Sale is consistent with Standard Life's strategy and continued focus on growing fee-based businesses. The Sale reduces Standard Life's exposure to spread/risk business, and the expanded relationship with Manulife deepens Standard Life Investments' access to global distribution. The Global Collaboration Agreement with Manulife will seek to strengthen Standard Life Investments' global distribution presence in Canada, the US and Asia. Standard Life expects that the relationship will more than treble Standard Life Investments' AuM distributed by Manulife (H1 2014: C$6bn) within three years from completion of the Sale, accelerating growth in assets and high quality fee-based revenues. Following the Sale and the acquisition of Ignis earlier this year, Standard Life Investments will manage £156bn of third party AuM globally, 174% up from the start of 2010.

Key benefits of the Sale

Achieves highly attractive value for Standard Life shareholders

·   The agreed sale price of C$4.0bn (£2.2bn) represents significant value for shareholders and realises a one off IFRS gain on sale of £1.2bn⁴

·   The price implies a price earnings multiple to forecast 2014 operating profit after tax of 19.5x² and a price to book value multiple of 1.9x³

·   These multiples compare favourably with comparable listed peers in Canada

Global Collaboration Agreement significantly deepens Standard Life Investments' global distribution reach

·   As part of the Sale, Standard Life Investments has entered into a Global Collaboration Agreement with Manulife. Through this relationship, Manulife will seek to distribute Standard Life Investments' funds in Canada, the US and Asia, deepening Standard Life Investments' distribution reach

·   The relationship is expected to treble Standard Life Investments' AuM distributed by Manulife (H1 2014: C$6bn) within three years

·   The Global Collaboration Agreement builds on Standard Life Investments' existing, highly successful relationship with John Hancock, the US unit of Manulife, which has generated AuM of US$5.6bn over the last three years

·   Standard Life Investments and Manulife will also explore other potential opportunities for collaboration between their respective investment capabilities and distribution platforms. It is expected there may be opportunities for Standard Life to seek to generate up to C$3bn of AuM for Manulife

·   Following completion of the Sale, Standard Life Investments intends to set up a new office in Toronto to continue to serve its institutional clients locally

Strengthened capital position enables expected £1.75bn return of capital

·   The Sale strengthens the Group's capital position following receipt of expected net proceeds of £2.2bn

·   This will enable the Group to:

o return an expected £1.75bn of capital to all shareholders; and

o retain the remaining net proceeds for general corporate purposes

·   The Canadian business includes a relatively capital-intensive book of legacy spread/risk business; as a result the Sale will substantially reduce the Group's overall capital requirements, volatility and exposure to market risk

·   Standard Life's IGD surplus is expected to be enhanced by the Sale. As at 1 July 2014, the Group's estimated IGD surplus, following the acquisition of Ignis was £3.4bn; assuming the Sale and capital return had occurred on 1 July 2014, the Group's estimated IGD surplus would have been £3.2bn

Enhances Standard Life's growth, earnings and cash profile

·   The Sale enhances the Group's medium-term earnings profile

o The Group's fee-based revenue model will be enhanced by the Sale. Since 2010, fee-based revenues (excluding the Canadian business) have grown at an annual growth rate of 9%⁷, and would have represented 89% of total Group revenues for the six months ended 30 June 2014, had the Sale occurred prior to this period

o The Board believes that the Sale and return of capital, together with the acquisition of Ignis announced earlier this year, will be accretive to Group operating earnings per share⁶.  Following the proposed share consolidation, the Sale and capital return together are expected to be broadly neutral to operating earnings per share⁶

·   The growth prospects of Standard Life's core businesses are strong, and will be further enhanced by the Global Collaboration Agreement with Manulife

o Standard Life Investments continues to deliver excellent investment performance for its clients, while expanding its investment capabilities and distribution reach, both globally and across a wider client base

o The UK business is positioned to benefit from regulatory, market and demographic changes through its advanced technology, platforms and investment propositions which meet the needs of its retail and corporate customers and their advisers

o The Group's joint ventures in India and China are well positioned for growth

·   Standard Life's simple business model of global investment expertise supported by its own distribution and strategic alliances globally means it is ideally positioned to deliver value for customers and clients and grow returns for shareholders

Standard Life intends to maintain its progressive dividend policy

·   Following the Sale, return of capital and share consolidation, it is the Board's intention that Standard Life's progressive dividend policy of growth in dividend per share will be maintained

·   This is consistent with Standard Life's unbroken record of annual growth in dividend per share since listing in 2006 and underpinned by the Group's growth prospects

3.    Principal terms and conditions of the Sale and the Board's recommendation

A sale agreement between Standard Life and one of its wholly-owned subsidiaries and MLC has been entered into, pursuant to which the relevant subsidiary has agreed to sell shares in Standard Life Financial Inc. and Standard Life Investments Inc., the Group's asset management subsidiary in Canada (the "Share Sale"). Pursuant to this sale agreement, a business transfer agreement is to be entered into between Standard Life Assurance Limited and Manulife and one or more affiliates of Manulife under which Standard Life Assurance Limited will agree to transfer the business of its Canadian branch to Manulife (the "Business Transfer"). The Canadian branch business written by Standard Life Assurance Limited is currently fully reinsured to The Standard Life Assurance Company of Canada. The Share Sale is not conditional upon the Business Transfer completing but the Business Transfer is conditional on the Share Sale completing.

The total consideration payable in cash to Standard Life by Manulife in respect of the Sale is C$4.0bn (£2.2bn). The total consideration payable on completion is subject to limited closing adjustments only.  

Owing to the size of the Sale relative to the size of Standard Life, the Sale constitutes a Class 1 transaction for the purpose of the Listing Rules and is conditional upon the approval of Standard Life's shareholders at a General Meeting. The transaction is anticipated to complete in Q1 2015 and is also conditional upon the relevant regulatory approvals, including from the Office of the Superintendent of Financial Institutions ("OSFI"), the Canadian Minister of Finance and the Canadian Commissioner of Competition. MLC has committed to making commercially reasonable efforts to obtain such approvals. In the case of the approval by the Canadian Competition Bureau, MLC has agreed to negotiate and implement by way of a consent agreement any remedy required to obtain clearance. In return for MLC agreeing to take such action, and in the event that remedies of a material nature are required by the Canadian Competition Bureau, Standard Life has agreed to pay to MLC an amount related to the cost to MLC of such remedies up to a maximum of 10% of the total consideration for the Sale.

Certain circumstances in which the Sale can be terminated and consequences of termination are set out in Appendix 2.

The Board considers the Sale to be in the best interests of Standard Life and its shareholders and intends to recommend that shareholders vote in favour of the resolution to approve the Sale at the General Meeting.  The Board has received financial advice from J.P. Morgan Cazenove in relation to the Sale.  In providing their advice to the Board J.P. Morgan Cazenove has relied on the Board's commercial assessment of the Sale.

4.    Key information on the Global Collaboration Agreement

Standard Life Investments has entered into a Global Collaboration Agreement with Manulife. Through this relationship, Manulife will seek to distribute Standard Life Investments' funds in Canada, the US and Asia, deepening Standard Life Investments' distribution reach. The relationship will seek to cover a broad range of Standard Life Investments' investment capabilities including global absolute return, equities and fixed income, which are expected to be distributed through Manulife's retail and wholesale channels, but also has the potential to include investments by Manulife's general account. Standard Life Investments and Manulife will also explore other potential opportunities for collaboration between their respective investment capabilities and distribution platforms and it is expected there may be opportunities for Standard Life Investments to seek to generate up to C$3bn of AuM for Manulife.

The Global Collaboration Agreement is expected to more than treble Standard Life Investments' AuM distributed by Manulife within three years from completion of the Sale. Currently, Standard Life Investments manages US$5.6bn of AuM through its existing, highly successful relationship with John Hancock, the US unit of Manulife.

5.    Financial effects of the Sale and use of proceeds

On completion of the Sale, the Group is expected to receive net cash proceeds (after estimated transaction costs) of approximately £2.2bn, representing approximately 24% of Standard Life's market capitalisation as at 2 September 2014.

Standard Life intends to return £1.75bn (equivalent to 73p¹ per share) to all shareholders based in the UK by means of a B/C share alongside a share consolidation.

The expected remaining net proceeds of £0.45bn will be retained for general corporate purposes.

The planned return of capital to shareholders follows the special dividend of £302m in respect of 2012, the acquisition of Newton's private client business in 2013 and Ignis in 2014. These steps, and the continuation of the Group's progressive dividend policy, further demonstrate Standard Life's focus on disciplined deployment of capital resources.

The Group will continue to monitor regularly its balance sheet, including the appropriate level of capital, liquidity and debt, but also taking into account opportunities to further invest in and grow the Group's businesses.

The Sale is expected to generate a one off IFRS gain on sale of £1.2bn⁴. Had the Sale and return of capital occurred on 30 June 2014, the pro forma Net Assets of the Group would have been £3.8bn compared with £4.6bn.

The Sale is expected to enhance the capital strength of the Group, thus enabling Standard Life to effect the return of capital to shareholders. As at 1 July 2014, the Group's estimated IGD surplus, following the acquisition of Ignis was £3.4bn; assuming the Sale and capital return had occurred on 1 July 2014, the Group's estimated IGD surplus would have been £3.2bn. On the same basis, the Group's debt leverage ratio would rise from 31% to 32% of total capital as at 30 June 2014.

The Board believes that the Sale and return of capital, together with the acquisition of Ignis announced earlier this year, will be accretive to Group operating earnings per share⁶.  Following the proposed share consolidation, the Sale and capital return together are expected to be broadly neutral to operating earnings per share⁶.

6.    Information on the Canadian business

Standard Life provides long-term savings, investment and insurance solutions to more than 1.4 million Canadians, including group retirement and insurance plan members. The Canadian long-term savings business is Standard Life's largest regional operation outside the UK with assets under administration of £28.3bn.

The Sale also comprises Standard Life Investments' domestic operations in Canada with £19.1bn assets under management, of which £12.7bn are managed on behalf of third parties, as at 30 June 2014.

Summary financial information with respect to the Canadian business (including Standard Life Investments' domestic operations in Canada) is set out below:

£m	HY 2014	FY 2013
Fee-based revenue	104	203
Spread/risk margin	103	351
Total income	207	554
Operating profit before tax	70	251
Operating profit after tax	53	200
Profit for the period attributable to equity holders of Standard Life plc	88	145
Gross assets8	28,093	27,312
Net assets	1,146	1,292
Assets under administration (£bn)	30.1	29.2

7.    Information on Manulife

Manulife is a leading Canada-based financial services group with principal operations in Asia, Canada and the US. Clients look to Manulife for strong, reliable, trustworthy and forward-thinking solutions for their most significant financial decisions. Its international network of employees, agents and distribution partners offers financial protection and wealth management products and services to millions of clients. Manulife also provides asset management services to institutional customers. Funds under management by Manulife and its subsidiaries were approximately C$637 billion as at 30 June 2014. The group operates as Manulife in Canada and Asia and primarily as John Hancock in the US.

Manulife Financial Corporation trades as 'MFC' on the TSX, NYSE and PSE, and under '945' on the SEHK. Manulife can be found on the Internet at manulife.com.

8.    Board, management and employees

There are not expected to be any changes to the Board as a result of the Sale. The Canadian business has, for many years, been run by its local management team, currently including Charles Guay (President and Chief Executive Officer of the Standard Life Assurance Company of Canada) and Roger Renaud (President of Standard Life Investments Inc.), who will transfer with the business as part of the Sale. There are no senior management or employees in the Canadian business that are key to the operation of the Group's remaining businesses.

The Canadian business employed 2,148 members of staff as at 30 June 2014. Following the Sale, it is expected that the total number of employees of the Group will be 6,564.

9.    Return of Capital

If the Sale is approved at the General Meeting and becomes effective, the Board is proposing to return a proportion of the proceeds from the Sale to ordinary shareholders by way of a B/C share scheme. The Board considered a number of methods for returning capital to shareholders and, having regard to the differing positions of shareholders of Standard Life, concluded that a B/C share scheme would be the most favourable method. In reaching this conclusion, the Board considered in particular the position of retail shareholders and the benefits of completing the return of capital to all shareholders within a fixed time frame. In conjunction with the return of capital, the Board proposes to implement a share consolidation.

Under the B/C share scheme as it is currently intended to be implemented, all shareholders will be issued unlisted, non-voting bonus shares, which will either be redeemed by Standard Life for cash or pay out a special dividend (those shares thereafter being cancelled or repurchased), depending on shareholder elections and subject to applicable securities laws. There will be no difference in the amount of cash received by Standard Life shareholders as a result of their election, although the tax treatment may differ.

Given the scale of the Sale and the intended return of capital, Standard Life intends to effect a consolidation of its ordinary share capital. The return of capital will require Standard Life shareholder approval, which the Board is expecting to seek in Q2 2015, following the completion of the Sale. The return of capital is not subject to regulatory approval but Standard Life will seek the non-objection of the relevant regulators.

10.  Dividend policy

Following the Sale, Standard Life will continue to pursue a progressive dividend policy, by reference to the per share dividend paid in recent years, taking account of market conditions and the Group's financial performance at the time. As a result of the proposed share consolidation in connection with the return of capital, the number of shares in issue will reduce, such that the aggregate cost of the dividend will reduce. The Group intends to announce its 2014 final dividend, the amount of which has yet to be determined, with the Group's results for 2014, on 20 February 2015.

Standard Life declared an interim dividend of 5.60 pence per share with its interim results on 5 August 2014 which will be paid on 21 October 2014 to shareholders on the register on 12 September 2014.

11.  Exchange rate

The purchase price for the Sale will be received by Standard Life in Canadian dollars (C$). References in this announcement to the expected proceeds and other items relating to the Sale in Sterling have been converted from the C$ amount applying an exchange rate of 1.80:1, being the closing UK rate as published by close of business on 2 September 2014.

Standard Life pursues a hedging strategy in relation to its Canadian business, to manage associated exchange rate volatility. In line with this strategy, 100% of the expected transaction proceeds have been hedged.

12.  Current trading

Standard Life issued its results for the half year ended 30 June 2014 on 5 August 2014.

Appendix 1: Selected KPIs as at 30 June 2014

	Group reported	Acquisition of Ignis	Sale of SLF Inc.	Sale of SLI Inc.	Eliminations	Adjusted total
AuA (£bn)	254.1	60.5	(28.3)	(19.1)	17.3	284.5
SLI AuM (£bn)	195.1	60.5	n/a	(19.1)	n/a	236.5
SLI AuM as a % of Group AUA	77%	n/a	n/a	n/a	n/a	83%
Third party AuM (£bn)	108.0	60.5	n/a	(12.7)	n/a	155.8
Third party AuM as a % of SLI  AuM	55%	n/a	n/a	n/a	n/a	66%

Appendix 2: Termination of the Sale and Termination Fees

The Sale can be terminated in certain circumstances including (but not limited to):

1.  0Bby Standard Life or MLC if Standard Life's shareholders do not approve the Sale

2.  1Bby MLC if (a) the Board fails to recommend that Standard Life shareholders vote in favour of the Sale or changes its recommendation in a manner adverse to MLC or (b) the Board approves and recommends an alternative proposal to that offered by MLC

3.  2Bby Standard Life if Standard Life wishes to enter into or enters into a proposal in respect of the Sale superior to that offered by MLC in accordance with the terms of the Share Sale ("Superior Proposal")

4.  3Bby Standard Life or MLC if the relevant regulatory approvals from OSFI, the Canadian Minister of Finance, the Canadian Commissioner of Competition and certain securities authorities are not obtained

5.  4Bthe Share Sale does not complete within the long-stop date of 9 months after signing

Standard Life has agreed that its Board will recommend that Standard Life shareholders vote in favour of the resolution to approve the Sale at its General Meeting, subject to the directors' rights to change such recommendation in accordance with their fiduciary duties.

Standard Life has agreed to pay MLC a termination fee of 2.5% of the total consideration, if the Share Sale is terminated by:

(i)   MLC, if (a) the Board fails to recommend, or changes its recommendation in a manner adverse to MLC, that Standard Life shareholders vote in favour of the Sale or (b) the Board approves and recommends an alternative proposal to that offered by MLC, or (c) the Standard Life shareholders' meeting is not held, or as a result of Standard Life's conduct is incapable of being held, within 9 months of the sale agreement being signed and this is the only condition to the sale agreement not satisfied;

(ii)  Standard Life or MLC, in circumstances where the condition to the Sale requiring the approval of Standard Life's shareholders is not fulfilled and this is the only condition to the sale agreement not satisfied because: (a) the Board withdrew or changed its recommendation, (b) Standard Life agreed to a Superior Proposal or (c) Standard Life fails to comply in all material respects with the provisions of the sale agreement dealing with competing bidders; or

(iii) Standard Life, where it has agreed or indicates its wish to agree to enter into a Superior Proposal.

Standard Life has agreed to pay MLC a fee equal to the actual expenses incurred by MLC and its affiliates in connection with the Sale up to a maximum of 2.0% of the total consideration ("Initial Payment"), if the Share Sale is terminated because the approval of Standard Life's shareholders is not obtained, and this is the only condition to the sale agreement not satisfied but the circumstances outlined above in (ii) do not apply. However, should Standard Life, or any affiliate, enter into an alternative proposal in respect of the Canadian business within 12 months of termination where the alternative proposal was made or publicly announced in good faith before that termination an additional termination fee equal to 2.5% of the consideration less the Initial Payment would be payable by Standard Life to MLC.

Notes to editors

¹    The per share figure is based on the current issued share capital. If the shares in issue increase prior to the return of capital, then the per share figure may reduce

²    Based on the guidance for operating profit before tax of £155m in 2014 given at the time of the results for the half year ended 30 June 2014 and an assumed tax rate of 26.5%

³    Based on book value of £1,146m as at 30 June 2014

⁴    IFRS gain on sale estimated based on the book value as at 30 June 2014 and the estimated net proceeds. The actual IFRS gain on sale will depend on the book value as at the closing of the Sale and the actual net proceeds received

⁵    Calculated based on current issued share capital

⁶    Calculated as if the Sale and return of capital had both completed at the beginning of the relevant financial period with the share consolidation ratio set by reference to the current share price of 383 pence as at 2 September 2014

⁷    Compound annual growth rate based on fee based revenue (excluding the Canadian long-term business) for the half year ended 30 June 2014 of £654m compared with the full year ended 31 December 2010 of £973m

⁸      Gross assets presented for the year ended 31 December 2013 have been restated to show the effect of the change in accounting policy due to the adoption of IFRS 10 Consolidated financial statements and IFRS 11 Joint arrangements for the financial period beginning on 1 January 2014

 

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