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Standard Life says Lloyds didn't have right to pull US$147b

[LONDON] Standard Life Aberdeen is challenging Lloyds Banking Group’s decision to pull its money from the firm as the asset manager seeks to keep its biggest customer.

Lloyds will withdraw the £109 billion (S$197.3 billion) because it claims that the merger of Aberdeen and Standard Life made the combined firm a competitor to the lender’s own insurance business. Standard Life, which has since agreed to sell its insurance business, says the bank doesn’t have the right to terminate the arrangement because they’re not material rivals.

The two firms are now locked in arbitration about the contract to oversee the money, the asset manager said on Tuesday. Aberdeen and Standard Life merged with the intention of turning the firm into a US$1 trillion asset manager. If the bank pulls the money, it would deal a large blow to that plan by reducing the firm’s assets under management by nearly 20 per cent.

“We note and are disappointed by the comments made by Standard Life Aberdeen, particularly in the light of our position as a major customer,” the bank said in an emailed statement. “Standard Life Aberdeen is a clear and material competitor of Scottish Widows and Lloyds Banking Group in the UK and to suggest otherwise is not credible.”

Pointless Exercise?

"Lloyds is ultimately a customer and they’ve decided they don’t want to be the customer anymore," said David McCann, an analyst at Numis Securities. "It feels a rather pointless exercise in many ways. They should just move on and not bring too much attention to it because it doesn’t set a particularly great precedent."

The arrangement between the two companies, which will end by the first half of 2019 unless the decision is reversed, was a legacy of Aberdeen’s acquisition of Scottish Widows Investment Partnership from Lloyds in 2013. That made the lender one of Aberdeen’s biggest shareholders in addition to being a competitor.

Lloyds is holding a contest among fund managers interested in overseeing the money. The bank is likely to allocate the funds to several firms after the contract with Standard Life expires in June of next year, Bloomberg News reported in April.

"Whatever the merits of the argument, it is difficult to see how going through a legal dispute resolution process will improve relations," said Charles Graham, an analyst at Bloomberg Intelligence.

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