Abrdn was on Wednesday applying the finishing touches to a £1.5bn takeover of Interactive Investor (II), the DIY stock-picking platform, in a move that will transform the FTSE 100 asset manager’s personal investing capabilities.
Sky News has learnt that abrdn, headed by Stephen Bird, could announce the acquisition of II as early as Thursday after weeks of exclusive negotiations.
The deal, which will not require abrdn to raise fresh equity, will see it become the owner of a major rival to the likes of London-listed Hargreaves Lansdown and AJ Bell.
It will also end II’s ambitions of joining its rivals as a separately quoted company, following months of preparations for a 2022 stock market flotation.
Stephen Bird was appointed chief executive of abrdn in September 2020
Sources said that II would operate independently within abrdn and would continue to be run by Richard Wilson.
Sky News revealed that the two companies were in talks about a deal last month.
II has more than 400,000 personal investing clients, positioning it behind only Hargreaves Lansdown by customer numbers in the UK market.
It has made a string of acquisitions of its own, such as the stock-dealing platform The Share Centre, and has about £57bn in assets under administration.
The swoop by abrdn will take it further into direct-to-consumer investing, and will represent a bold move by Mr Bird, a former Citi executive who joined the asset management group in July 2020.
Investors already appear to have given the deal their backing, sending shares in abrdn sharply higher when the talks were confirmed in November.
That was a significant boost to Mr Bird, who inherited a company scarred by investors’ reaction to the £11bn merger of Standard Life and Aberdeen Asset Management in 2017, with the combined group having lost close to half its value since that tie-up was announced.
Since then, the co-chief executives of Standard Life Aberdeen – now renamed abrdn – have both stepped down.
Martin Gilbert, the Aberdeen Asset Management founder, has emerged in a large number of City posts, including at the helm of AssetCo, which he has begun using as a consolidation vehicle in the asset management sector, while Keith Skeoch has held a number of regulatory and trade association roles.
For Mr Bird, however, the transaction comes at an opportune time.
Abrdn has total surplus regulatory capital of about £2bn, having sold another chunk of its stake in India’s HDFC in late September, meaning financing the takeover of II has not been problematic.
The deal also comes sufficiently early in his tenure as CEO to make a potentially significant difference to the long-term performance of abrdn, which has been hit by large fund outflows during most of the period since it was formed in its current guise.
Under Mr Bird, the tide has begun to turn, with fee-based revenues and adjusted operating profits recently showing their fastest growth since the company was created in its current form.
He has said he wants to turn abrdn into a simplified and more focused investment management group with stronger digital capabilities for personal and institutional clients.
Since taking the helm of the company, which now manages more than £530bn for clients, he has jettisoned businesses including Parmenion, a platform servicing independent financial advisers, and a real estate division in the Nordics.
Its rebranding in August – which provoked some derision in the City – would, Mr Bird, said, provide “clarity” and leave it “better-positioned to have impact at scale as a global business”.
The takeover of II will deliver a big payday for JC Flowers, II’s biggest shareholder and other investors which include a group of venture capital funds.
JC Flowers engineered the combination of II and TD Direct in 2017, since when the business has grown into an industry powerhouse.
JP Morgan is advising abrdn on the talks, while II and its shareholders are being advised by Fenchurch Advisory Partners and UBS.
Abrdn, II and JC Flowers declined to comment.