Standard Life’s promise of a £1.75bn shareholder pay-out following the surprise sale of its Canadian business sent shares sharply higher yesterday.
The Edinburgh-based pensions giant rose by as much as 10 per cent on the FTSE 100 Index after it announced the sale to a subsidiary of Canadian insurance and wealth manager Manulife for around £2.2bn.
The planned return of capital to shareholders of £1.75bn is equivalent to 73p a share and takes the total amount in dividends and other returns to shareholders since 2010 to £3.5bn or 147p a share, Standard said. Standard still has a large base of individual shareholders following its demutualisation in 2006.
Chief executive David Nish added: “This transaction provides our group and its shareholders with significant strategic and financial benefits.”
Standard said it had been successful in transforming its Canadian operations into a business which has consistently delivered strong results.
Mr Nish continued: “As a result, the Canadian business is now a much more attractive proposition and the sale allows us to realise fully the value of the business for our shareholders.”
Analysts were extremely positive on the benefits for Standard Life, describing the deal as “excellent” and “fabulous” in notes to clients.
Panmure Gordon’s Barrie Cornes hailed what would be an improved risk profile of the company, saying: “Given the Canadian business includes a capital-intensive book of legacy spread/risk business, the disposal will substantially reduce Standard Life’s overall capital requirements, volatility and exposure to market risk.”
Shore Capital analyst Eamonn Flanagan said the disposal removes significant exposure to spread-and-guarantee risk but kept a “hold” rating on the stock, preferring Prudential and Legal & General for their purer exposure to insur- ance.