The £140m ($182.5m, €163.6m) deal is still subject to regulatory approval but it is expected to go through by December this year. Cofunds had been valued as high as £175m by L&G in the recent past.
The sale includes the Investor Portfolio Service platform as well as Cofunds’ retail and institutional business. All employees will be taken on by Aegon, the owner of asset manager Kames Capital.
Three transactions
L&G said it has worked closely with Aegon to deliver ‘three mutually beneficial transactions’.
In addition to the deal announced today, L&G pointed to its acquisition of Aegon’s £2.9bn back book annuity portfolio and the five year distribution agreement to provide individual annuities to Aegon pension customers.
The sale will improve L&G’s current Solvency II surplus by £125m, and its economic capital surplus by £105m. This surplus was estimated at £5.3bn at 30 June 2016. It also noted that the sale of does not impact its relationship with building society Nationwide.
Aegon said it expects to generate annual cost savings of £60m, equivalent to 15% of the combined UK cost base, once it has fully integrated Cofunds.
Growing alongside intermediaries
Aegon UK chief executive, Adrian Grace, said: “Aegon is now well on the journey from a traditional life and pensions provider to the largest workplace and retail platform business. We are committed to growing our business alongside the intermediaries that we depend on and will use our enhanced scale to improve user experience, drive proposition enhancement and lower the cost over time.”
L&G group chief financial officer, Mark Gregory, said: “Over the last few years Legal & General Investment Management has developed a market leading international defined contribution pension platform business. LGIM manages £50bn in UK and US defined contribution pension assets, and plans to expand into the DC market of Asia.
“Cofunds is at the point where it requires a significant upgrade in technology to exploit its leadership position in the UK platform market. We have concluded that this long term commitment is best achieved under Aegon’s ownership as a specialist wealth platform provider.”
David Hobbs, Cofunds chief executive, added: “Cofunds was a pioneer in the platform market and has built a strong franchise with over 750,000 retail clients plus an enviable institutional business. We’re delighted with our new ownership and the combined proposition that we’ll be able to bring to intermediaries.”
