Sandy Crombie can barely conceal his irritation. It has been a week since he
abandoned his £4.9 billion bid for Resolution and there is still so much
that the Standard Life chief executive cannot say about his battle for the
closed-life funds group.
Because Standard Life’s formal offer has yet to lapse, Mr Crombie is still
governed by rules surrounding mergers and acquisitions. He could find
himself in hot water with the Takeover Panel if he failed to choose his
words carefully.
He is still stinging from one formal censure over a statement that his insurer
made to the stock market late in the six-month campaign, in which it
appeared to suggest that it was considering increasing its cash-and-shares
bid.
In truth, this is a minor setback for Mr Crombie, 58, a “Standard Lifer” who
will celebrate four years at the helm of Britain’s fifth-largest insurer in
January and can boast a 41-year career at the group.
Yet it neatly underscores how, in each twist and turn of Standard Life’s
ultimately doomed assault on Resolution, fortune has gone against it. In the
face of a 24.1 per cent blocking stake in Resolution held by Pearl
Assurance, its adversary in the deal, and a double-digit slide in its own
share price, Standard Life was forced to admit defeat eight days ago, having
previously secured a deal backed by the board.
The gag on Mr Crombie means that he cannot reveal, for example, exactly when
Standard Life first began to circle Resolution, led by Clive Cowdery, its
colourful chairman.
The insurer’s subsequent formal offer for Mr Cowdery’s FTSE 100 firm prompted
a fierce run-in with Pearl Assurance and one of the hardest-fought big
campaigns in recent memory.
Received wisdom is that Standard held detailed, but informal, talks with
Resolution at least twice over the past two years.
“Let’s just say we know Resolution of old,” Mr Crombie says, speaking in his
spacious offices in Standard Life’s imposing Edinburgh headquarters.
He points out that Standard Life Investments, the insurer’s fund management
arm, took out a 10 per cent stake in the group early in its life as a listed
company. It has been sold since.
“As a group, Standard Life has known Clive for some years,” Mr Crombie says.
“I’ve known him personally for several years.” In his first detailed
interview since having to abandon his previously agreed bid for Resolution,
Mr Crombie comes across as a man eager to set the record straight and clear
his and his company’s name.
A full-frontal attack by Pearl, a rival closed-life-funds group led by the
entrepreneur Hugh Osmond, led to accusations that the Standard Life bid was
ill-conceived, mistimed and naive. Once Mr Crombie had conceded defeat, his
critics immediately said that his position was looking unsteady and that the
insurer itself might be vulnerable.
Mr Crombie, clearly slighted by some of the more personal attacks on his
management, bats away speculation that the board was divided over the bid.
“It wasn’t going to happen unless I wanted it to happen,” he says.
He shrugs at the suggestion that he had resisted moving on Resolution, in
opposition to Gerry Grimstone, his chairman, and David Nish, the finance
director, both of whom took lead roles in negotiating the transaction.
“People may say that, but all I can say is the board was wholly unanimous in
its decision,” It “thought very hard” before eventually launching the offer
attempt, having met ten times specifically to discuss the issue.
For the record, Mr Crombie states firmly that Standard Life has no need to
raise fresh equity or debt capital, that business is strong and can continue
to grow organically and that he has the full confidence of the board. “It
hasn’t altered my personal plans,” he says.
Yet bidding for Resolution was a huge personal gamble for Mr Crombie, who
joined Standard Life straight from school in Fife in 1966.
Under his leadership, initially of Standard Life Investments in 1998 and then
as head of the group from 2004, its business has been transformed.
What started as a mutually owned mass-market provider of life assurance and
pensions is now a listed member of the FTSE 100 that sells higher-margin
savings, investment and retirement products and has a technology platform
that is the envy of its rivals.
For the nine months to the end of September, Standard notched up worldwide
life and pension sales of £11.7 billion, about 21 per cent above the same
point last year.
Sales of its celebrated self-invested personal pensions (Sipps) were 43 per
cent higher at £3.6 billion.
While observers were awaiting with interest Standard Life’s next move, many
were taken by surprise by its interest in a company that specialises in
closed pools of life insurance funds.
Mr Crombie says that he remains certain that trying to buy Resolution was the
right thing to do – noting as an aside that “management that are too timid
to go for the opportunities will never realise the full potential of their
businesses”.
He says: “Resolution came with a bundle of positives. We’ve not been
successful in protection. We don’t have retail bank distribution. There were
£50 billion of assets we could get to manage with very little extra costs.
“We would have acquired two million extra customers. We like new customers.”
Standard Life had planned to sell almost all the closed books to Swiss Re, the
reinsurance group, which would have stumped up £2.35 billion in cash for the
assets.
Moreover, Mr Crombie suggests that, in an ideal world, Standard Life would
have made its move sooner.
“Standard Life only had a share currency to make a move less than 18 months
ago,” he says. “We couldn’t have contemplated any such activity before
demutualisation.
“Then we couldn’t have moved in the early months after the listing because we
needed to demonstrate the success of our new business model. It was just
about the earliest move we could justify in what was quite a complex
scenario.”
In his reserved but gently insistent way, Mr Crombie argues that Standard Life
acquitted itself well during a battle with Pearl full of “war, propaganda
and misinformation”.
The Edinburgh-based insurer lost its cool only once, accusing Pearl of being
“self-serving and potentially misleading” after an 18-page circular put out
by its rival slating Standard’s new business model.
“I think we have conducted ourselves well and properly,” Mr Crombie says. “I
believe that Standard Life set out to do something that would have added to
shareholder value, but ultimately we had the courage to withdraw.
"At the end of the day, we were beaten, we had to withdraw, because the share
price was too weak, not because there wasn’t a way to complete this.”
Of Pearl’s aggressive bid campaign, Mr Crombie says: “There were no positives
attached to it whatsoever. It was a campaign that merely attacked the
opposition.”
Mr Crombie, who has developed a reputation as a “fixer”, is keen to move on
from Resolution. Although some sceptical analysts remain unconvinced, he
says that most of its major shareholders and the investment community backed
the logic of the deal.
He talks of the “unfinished business” of generating the £100 million of
efficiency gains promised at the UK arm this year.
He notes that the Canadian business is “returning to growth” and that progress
is being made in continental Europe and Asia.
In short, he says that Standard Life’s concentration on higher-margin products
that are “capital-lite” to fund has paid off.
“To believe our model is flawed, you have to believe that wealth will go out
of fashion,” he says.
This proud Scot is eager to move on. The question is: will the City let him?
Curriculum vitae
Born February 8, 1949
Education Buckhaven High School; Fellow of the Faculty of Actuaries
Career Joined Standard Life as actuarial student in 1966; general
manager (operations) 1988-1994; group chief investment manager 1994-98;
general manager (operations) 1988-94; chief executive of Standard Life
Investments from 1998 launch2004; deputy group chief executive, Standard
Life 2002-2004; group chief executive from January 2004-present, overseeing
the demutualisation of Standard Life and its successful flotation
Family Wife, two daughters
Other interests Chairman, Edinburgh Unesco City of Literature Trust;
vice-chairman, Royal Scottish Academy of Music and Drama; HRH Prince of
Wales Ambassador in Scotland for Corporate Responsibility
The leader questioned
If you could change one thing in the financial and commercial environment,
what would it be? I’d wish for people to take more interest in managing
their personal financial affairs.
Who is or was your mentor? I’ve learnt a great deal from other people, but
I’ve never had any single person I considered my mentor.
Does money motivate you? No.
What is the most important event, good or bad, to happen in your working life?
Leading Standard Life to the stock market with overwhelming support from
our former members and the City.
What gadget must you have? My iPod and its docking station come in handy
when I’m in the office late or on a weekend.
What does leadership mean to you? Earning trust, winning support and taking
people with you.
Which business person do you most admire? I’ve learnt from many.
How do you relax? At home with my family.
