GM 2018 – video transcript– detail on capital return
Following the sale of our UK and European insurance business to the Phoenix Group, we are proposing, subject to regulatory approvals,a return of up to £1.75 billion toshareholders. Should our shareholdersapprove this, there are two parts to how we will return the capital once the sale has been completed.
The first part involves a return of £1bn through a B share scheme.
The second part involves returning up to £750 million througha share buyback programme.
For the B share scheme, shareholders would receive one B share for every Existing Ordinary Share they own at the Record Time.This is the dateon which we take a "snapshot" of the shareholder register – to see who participates in the B share scheme – and the number of shares in issue, which determines the amount of the capital returned to each shareholder. We’ll let you know the specific dates for the Record Time and the B share scheme implementationon or near Completion of the sale, which we expect will be in the 3rd quarter of this year.
The exact value of each B share will depend on the number of shares in issueat the Record Time.
Currently, we expect the minimum value of these shares to be 33.4 pence each. That’s based on dividing the proposed £1bn by the number of shares in issue, currently just under 3 billion.
Once we’ve redeemed the B shares and paid out the proceeds, we’ll then carry out a share consolidation. This reduces the total number of shares in issue and so we will replace your existing ordinary shares with new ordinary shares. The share consolidation helps ensure that the market price of each new ordinary share is broadly the same as each existing ordinary share immediately before the return of capital, subject to any market fluctuations.
We will set the actual consolidation ratio nearer to the time. But to show you how it could all look in practice, here’s an example.
Acompanyis worth £10bn, andit’s just returned£1bn to shareholders.
The return of capital means the company is now valued at £9bn – and as a result, the share price of the company drops by 10% to £9 each.
At this point the same number of shares would still be in issue – so a shareholder with 100 shares would still have that number before and after. The value of the shares will have dropped by 10% but the overall value still held by the shareholder would be the same –the difference, is that it would now be made up of £900 in shares and £100 from the capital return.
The share consolidation then takes place. Because the company value has dropped, to £9bn from £10bn, the consolidation is done on a "9 for 10" basis, to help maintain the share price.
So in this case, a shareholder would receive 9 new ordinary shares for every 10 existing ordinary shares they held before the consolidation. They’d have fewer shares, but the same total share value.
For shareholders who are UK or Irish tax-resident, it’s worth noting that the cash we return will be treated as a capital receipt for tax purposes.
The second part of the return of capital is the share buyback programme. This is where a company buysback its own shares from the market, reducingthe total number of these shares in issue. Over a period of months,we intend to buy back up to £750 million of Standard Life Aberdeen plc shares.
We have had a strong track record for delivering shareholder value, and we’re determined that our proposals will help us maintain this.
You can find out more, including a detailed Circular and information on our General Meeting, atstandardlifeaberdeen.com.