Standard Life's Canadian sale delivers £1.75bn surprise to shareholders

Scotland's largest insurer has sold its 180-year-old Canadian business for £2.2bn in cash.

by Dave Waller
Last Updated: 04 Sep 2014

Standard Life has sold its 180-year-old Canadian wing for $4bn Canadian dollars ($3.7bn; £2.2bn), and now plans to return £1.75bn of capital to shareholders – that's nearly a fifth of its current market value. No surprise then that Standard Life's share price rose to a high of 427.60 this morning after the announcement was made late last night, from 386.10 the previous day.

Standard Life's chief exec David Nish seems to think it was a standard deal, saying: 'Most people would think we have got a good price.'

That's an understatement. The £2.2bn price tag represents almost twice the book value of the business, about 19.5 times earnings, and Standard Life will book a £1.2bn gain on the sale.

The company's logic was that a sale to a domestic Canadian business was better for shareholders than keeping hold of it and pursuing an independent strategy there. It certainly seems to have worked: the cash return to shareholders is worth 73p a share.

The proud new owner is the Canadian insurer Manulife, which will now take on Standard Life's savings, retirement, insurance and investment management businesses in the country.

It has also agreed a deal with Standard Life to distribute each other's investment products around the world – Manulife will distribute Standard Life Investments products in Canada, the US and Asia, while Standard Life will distribute Manulife products in the UK. This shows that Standard Life is increasingly finding asset management to be a safe bet, beyond traditional insurance policies.

As to what Standard Life will do with the rest of the money, it's not yet clear. The UK savings market will be tempting, as investment firms rush to create new savings vehicles in the wake of George Osborne's shakeup of the pensions and annuity market.

Standard Life has also invested in local insurance and fund management companies in India, and may look to further that. Plus of course it may wish to keep something back to lessen any impact should Scotland vote yes to independence.

Either way Standard Life looks to be in an enviable position. Following this latest distribution, the group will have handed out £3.5bn, or 147p per share, to shareholders since 2010. That's some standard.

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