Standard Life Aberdeen's share price fell this morning after the firm revealed plans to return £1.75bn to its shareholders following the sale of its UK and European insurance business to Phoenix Group.
The finance giant this morning announced plans to gift £1bn to shareholders via a B share scheme, in which new B shares will be granted which can then be redeemed for cash. To maintain share prices at comparable levels, the board is proposing this be accompanied by a share consolidation.
The remaining £750m being returned through a share buyback programme, through an on-market purchase of SLA shares, which will take place after the B share scheme and share consolidation.
Shareholders will be sent a circular tomorrow (30 May), with a general meeting to hold the vote planned for 25 June.
But so far investors appeared unimpressed with the plans: Standard Life Aberdeen's share price was down 1.6 per cent in early trading.
The board said it expects "surplus capital within the group" as a result of the deal, as well as anticipated lower capital requirements thereafter .
The rest of the proceeds from the sale "combined with existing liquidity within the SLA Group", will be used to pay down some of SLA's outstanding debt of £1.9bn, starting with the tier one bonds, as well as support investment and other general corporate purposes.
Speaking ahead of the company's annual general meeting, chairman Sir Gerry Grimstone said: "The last year has been a period of significant change for Standard Life Aberdeen with the proposed sale of the UK and European insurance businesses completing our transformation to a capital light investment company."
He added: "The cash generated from the sale will enable us to continue to invest in the development of our business and also to return surplus capital to shareholders.
"Our proposal to return up to £1.75bn by way of a B share scheme and share buybacks represents over 15 per cent of our market capitalisation at close of business on 25 May, and would extend our long-running track record of returning surplus cash to shareholders."