LONDON - The British bank Lloyds said Monday that it had agreed to sell its asset management arm to Aberdeen Asset Management in stock-and-cash deal worth up to 660 million pounds, or $1.06 billion.
The deal to combine the Lloyds unit, called Scottish Widows Investment Partnership, with Aberdeen will create Europe's largest publicly traded asset manager.
Lloyds will initially receive a 9.9 percent stake in Aberdeen worth £560 million based on Aberdeen's closing price on Nov. 15 of 427 pence. However, Lloyds can terminate the sale if Aberdeen's stock drops below 320 pence.
The bank also will receive up to £100 million in cash over a five-year period depending on the growth of business generated from the strategic relationship between the two firms. Aberdeen will manage assets on behalf of Lloyds as part of the deal.
'I'm very pleased today to be announcing this strategic partnership with Aberdeen Asset Management - this is a good deal for them, and a good deal for Lloyds Banking Group,' said António Horta-Osório, chief executive of Lloyds.
Aberdeen said the deal was expected to add about £136 billion to its assets under management and £234 million in annualized revenue. Aberdeen had £200.4 billion in assets under management as of Sept. 30.
'This transaction is significant for the long-term prospects of Aberdeen in a number of ways,' said Martin J. Gilbert, Aberdeen's chief executive. 'It strengthens our investment capabilities and adds new distribution channels; the acquisition of S.W.I.P. adds scale to our business across a range of asset classes; and it also introduces a strategic relationship with Lloyds Banking Group.'
The sale does not include the Scottish Widows life, pensions and investment business.
The transaction includes lock-up agreements that limit the ability of Lloyds to sell its stake in Aberdeen over a three-year period.
Based on Aberdeen's Nov. 15 closing price and the cash consideration, Lloyds said it expected to post a gain of £190 million from the sale.
The deal is expected to be completed by the end of the first quarter 2014 and is subject to regulatory approval.
J.P. Morgan Chase acted as Aberdeen's financial adviser on the transaction.
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