Struggling fund manager Abrdn plans to return up to £500mn to shareholders in an attempt to head off a revolt after its humiliating relegation from the FTSE 100 earlier this month.
Abrdn is aiming to give shareholders an additional £400mn-£500mn before the end of 2022 after selling down stakes in other companies, according to people with knowledge of the situation.
The board is currently discussing the best mechanism for the return, which could be in the form of a special dividend, one person said. The plans will be subject to approval from regulators.
The plan to step up returns to investors comes in the wake of Abrdn’s share price plunging over 40 per cent in 2022, leading to its demotion from the UK’s blue-chip index for the first time since the company was formed with the 2017 merger between Aberdeen Asset Management and Standard Life. In the first half, Abrdn swung to a £320mn loss.
Last month, chief executive Stephen Bird, told the FT: “People have been frustrated by the pace of change five years after the merger, but I’ve been here since September 2020. I can only move as quickly as you can manage change [and] we are moving very, very quickly.”
The fund group, which manages £508bn for investors, said earlier this year it would return £300mn, of which £150mn would be through a share buyback. The £400mn-£500mn payout is expected to include the remaining £150mn that is yet to be distributed.
Abrdn has built up considerable capital buffers through sales of valuable stakes in insurers HDFC India and Phoenix.
Bird told investors in August that he would “continue to return capital in excess of business needs as further stake sales are realised”.
The company has sold two stakes in HDFC so far this year, the most recent this week, together raising almost £500mn. It also sold £300mn worth of Phoenix stock earlier this year, about half of which financed the existing share buyback programme.
The stake liquidations will be necessary to help Abrdn maintain its capital buffers, analyst Mandeep Jagpal at RBC said in a note, adding that the company’s “high proportion of structural costs relative to peers leaves . . . profitability more susceptible to market downturns than peers”.
However other analysts believe a more sweeping intervention is necessary at Abrdn. “We continue to think that a more radical strategy is needed to turn the group around and maximise value, such as the break-up of the group or sale of the group in full,” David McCann at Numis wrote.
Abrdn declined to comment.