A £1.1bn UK listed real estate trust could be created following Standard Life’s £380m purchase of Ignis Asset Management.
This week, the Edinburgh-based insurance giant confirmed it has entered into an agreement with Phoenix Group Holdings to buy its £67bn Ignis Asset Management platform. This includes £2.6bn of direct property assets.
Glasgow-based Ignis’ flagship funds are the £875.7m FTSE 250-listed UK Commercial Property Trust and the £1bn open-ended authorised unit trust, Ignis UK Property Fund.
Ignis has a 25% stake in the listed vehicle and holds the external management contract led by senior investment director Robert Boag.
Sources said that it could swallow up the Guernsey-listed Standard Life Investments Property Income Trust.
It has a £188.7m diversified property portfolio and is primarily managed by Jason Baggaley alongside David Stewart.
One fund manager said: “A merger of the two funds is almost a certainty.
“Standard Life has never achieved critical mass with its fund, so combining them would be better for shareholders.
“However, there will be fallout because you then have one fund and two managers.”
Merging two listed trusts requires each fund’s boards to agree a merger ratio at which to combine the vehicles in order to deliver value to both sets of investors. This could be based on share price or NAV.
UK CPT, which in 2010 was set to merge with F&C Commercial Property Trust before shareholders voted against the plan, had an NAV of 73.1p in its quarterly update to 31 December against this week’s share price of 79.7p.
Standard Life’s Property Income Trust’s current share price is 72.2p and its NAV was 65.5p at the end of 2013.
Following confirmation of the Standard Life deal, UK CPT board chairman, Christopher Hill, said: “UK CPT has, since its inception in 2006, retained…Ignis Asset Management, as its external investment manager.
“The board will monitor the situation carefully and update shareholders as appropriate.”
The takeover will see Standard Life’s UK assets under management grow to £15.1bn with the addition of Ignis’s £2.6bn direct property portfolio and £4m of “oversight assets”.
The cash deal is expected to be completed on or before 30 June this year, conditional on FCA approval.
Bridget.O’Connell@estatesgazette.com
