Standard Life Says Lloyds Didn't Have Right to Pull $147 Billion

(Bloomberg) -- Standard Life Aberdeen Plc is challenging Lloyds Banking Group Plc’s decision to pull its money from the firm as the asset manager seeks to keep its biggest customer.

Standard Life, which is getting out of the insurance business, argues the bank doesn’t have the right to terminate the mandate to oversee 109 billion pounds ($147 billion) because the two firms are not material rivals. Lloyds is withdrawing the money because it claims that the merger of Aberdeen and Standard Life created a competitor to the lender’s own insurance unit.

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 $1 trillion money manager, a plan that’s been dealt a significant blow by Lloyds whose mandate makes up almost 20 percent of the assets overseen by Standard Life.

“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 U.K. 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.

--With assistance from Stefania Spezzati

To contact the reporter on this story: Julie Edde in London at jedde2@bloomberg.net.

To contact the editors responsible for this story: Neil Callanan at ncallanan@bloomberg.net, Andrew Blackman

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