Subject to regulatory approval, the deal is expected to complete by the end of the second quarter.
Bringing together Ignis’ £65.9bn of assets and SLI’s £184.1bn, the deal brings the group’s combined assets to £250bn, underpinned by parent Standard Life, which ran £244bn of assets under administration at 31 December 2013.
In addition, Phoenix has agreed a long-term strategic asset management alliance with SLI, including a mechanism to share value resulting from any further Phoenix assets managed by SLI.
£50m of cost-cutting
SLI has identified a material cost saving of more than £50m by the third year of ownership through the integration of the two businesses’ operating platforms but is not yet ready to disclose which areas of the business will suffer job losses.
Standard Life group head of corporate communications Barry Cameron said as a growing business, SLI has already created 400 new jobs in the last few years and was expecting to create roughly 200 more in the near future.
He said: “There are many talented people who work at Ignis and throughout the transition process we will be looking to keep them within the business if we can and will aim to minimise the impact in terms of headcount.”
SLI’s range of absolute return funds, including market leader Global Absolute Return Strategies (GARS), will be expanded with the addition of Ignis’ Absolute Return Government Bond Fund and its complementary investment process, with government bonds and liquidity key areas of expertise SLI has highlighted.
The deal will increase SLI’s book of third party business by 64% of total AUM, including adding four additional companies under long-term contracts to SLI’s insurance client base.
Keith Skeoch, chief executive of Standard Life Investments, said: "This acquisition is entirely complementary, deepening our investment capabilities, broadening our third party client base and strengthening our strategic position from which to develop a business in the rapidly developing liability aware market. Standard Life Investments continues to perform very strongly.
"Continuity of investment performance and commitment to client service and relationship management remain our key priorities, with migration and integration of Ignis taking place in a controlled manner under unified management from day one."
The deal will see Phoenix reduce its gearing from 44% to 39%, allowing it to meet its gearing target two years earlier than anticipated. The remaining proceeds would be used by the group for general corproate purposes.
Bestinvest managing director business development and communications Jason Hollands added: "Standard Life Investments has identified material cost savings from the integration of Ignis with Standard Life Investments' operating platform, exceeding £50 million by the third full year of ownership. That's suggests some serious metal bashing.
"The addition of a major book of insurance funds will add a very stable revenue stream, albeit in gradual run-off but with it will come enhanced capabilities in asset and liability matching. That is a highly technical skillet that is in strong demand by defined benefit pensions schemes. While many of these are now closed to new members, they still represent vast pools of capital and therefore a new business opportunity for Standard Life Investments in the institutional segment."