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Aegon seals £140m deal to buy Cofunds

Aegon seals £140m deal to buy Cofunds

Legal & General has agreed to sell Cofunds to Aegon in a £140m deal, ending months of speculation about the future of the platform.

FTAdviser first reported that Aegon was a potential buyer of Cofunds back in February, and several market commentators heralded the move as “game-changing”.

L&G purchased Cofunds for a cash consideration of £131m back in March 2013.

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According to the L&G’s recent results, published earlier this week, Cofunds was hit by outflows of £700m during the first six months of the year.

The sell-off includes the Investor Portfolio Service platform, as well as Cofunds’ retail and institutional business.

Aegon expects to generate a yearly cost saving of £60m across its UK business through the deal.

Mark Gregory, group chief financial officer of Legal & General, said Cofunds is at the point where it requires a “significant upgrade in technology”.

“We have concluded that this long term commitment is best achieved under Aegon’s ownership as a specialist wealth platform provider.”

The acquisition is subject to regulatory approval, which is expected by December 2016.

Adrian Grace, chief executive of Aegon UK, said: “For users of the platform, today’s deal provides certainty regarding its future and we will keep what has made Cofunds a powerhouse and the primary platform for so many advisers, and improve what needs improving.”

He said the success of the deal will depend on advisers’ transition across to the platform.

“We recognise the scale of the task at hand and the importance of getting the detail right,” Mr Grace said, adding: “We will work closely with advisers throughout this process to make sure we do just that.”

Since the announcement was made this morning, Aegon’s share price has dropped slightly, while L&G’s has nudged up.

According to Aegon’s second quarter results, released today, the Dutch insurer’s underlying earnings before tax dropped to €435m (£373m), from €505m (£434m) reported over the same period last year.

Its new life sales also declined 11 per cent to €244m (£210m), which it said was due to its focus on profitability.

L&G recently purchased Aegon’s £2.9bn back book annuity portfolio, and reached a five-year distribution agreement to provide individual annuities to Aegon pension customers.

The results also revealed Aegon had made a net loss of €385m (£331m) between April and June this year due to the sale of its UK annuity book.

katherine.denham@ft.com