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Tuesday, October 27, 2015

Aberdeen Fails to Squelch Sale Rumors

News summary by MFWire's editors

One of the largest publicly-traded pureplay asset managers in Europe is trying to shut down talk about it being on the block, but Mister Market likes the idea.

Martin Gilbert
Aberdeen Asset Management
Chief Executive Officer
Patrick Jenkins, Madison Marriage, and Chris Newlands of the Financial Times report that, per unnamed sources, Aberdeen [profile] founder and CEO Martin Gilbert has "made informal approaches to a number of rivals in recent months," even as the weight of volatility in emerging markets has hit the Asia-focused asset manager hard. Meanwhile, both the FT and the Telegraph noted that Aberdeen's shares (ADN) on the LSE jumped up today even as the market fell: ADN ended up 2.93 percent, vs a 0.42 percent drop for the overall FTSE 100.

Aberdeen is fighting the story: a spokesperson reportedly went so far as to tell the FT that "in his 32 years running Aberdeen Asset Management, Martin Gilbert has never made a formal or informal approach to anyone to buy the business."

So, where's the smoke? The FT notes that a host of Aberdeen top brass, now including its global distribution chief, have recently departed or are about to do so. Aberdeen's AUM is down five percent year-to-date, and its share price is down 16.31 percent over the same period (even including today's bump). In the three months ended June 30, it suffered 10 billion pounds ($15.35 billion) in outflows. The AUM and flows woes lead at least one Aberdeen watcher to tell the FT that bonuses in December will probably suffer, leading to more staff departures. And analysts worry that Aberdeen might have to lay off 100 of its 2,485 employees.

"The mood at the company is bad," one ex-Aberdeen senior employee tells the FT. "People I speak to are fed up with how things are going. From what I hear it's not a happy place to be at the moment."

On the other hand, this is not Aberdeen's first time in a tight spot.

"Everyone is talking about Aberdeen like we are in some sort of crisis. Of course we're not, we're a business with 300 billion pounds of assets under management, more than 550 million pounds in net cash and a global franchise," Gilbert tells the FT. "Assets have fallen off due to the Asian downturn, but they will come back. If you want to talk about a crisis then look back to our split capital trust crisis in 2002."

Indeed, the Telegraph notes that Aberdeen's shares lost 97 percent of their value during that 2002 crisis, when some British members of Parliament branded Gilbert a "sophisticated snake-oil salesman." And of course this isn't the first rough market in Aberdeen's 32 years in business.

Unnamed Aberdeen senior management folk tell the FT that the company's biggest shareholder, Japanese giant Mitsubishi UFJ (which owns 17 percent of Aberdeen), supports Gilbert. And RBC Capital Markets analyst Peter Lenardos tells the Telegraph that he "would be surprised if Aberdeen sold from a position of weakness, which we believe it is currently in." After all, Gilbert (now 60 years old) founded the company himself 32 years ago and has guided it ever since, through thick and thin.

"We believe that selling now would be an admission of failure, and that a potential buyer would clearly understand the challenges that Aberdeen is facing and reflect that in its determination of value for the company," Lenardos tells the paper.

If Aberdeen is on the block, the FT has some ideas about who might bid: "a number of UK, US and Asian fund groups," according to unnamed asset manager sources; and private equity, including Blackstone, KKR, and Warburg Pincus. The paper also wonders about interest from Credit Suisse and Deutsche Bank, both of which Aberdeen bought businesses from in the past; Credit Suisse even held (and later sold) a 25 percent stake in Aberdeen. Yet per unnamed "bank insiders," the FT sees Credit Suisse and Deutsche as unlikely to bid in the short-term. 

Edited by: Neil Anderson, Managing Editor

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