* Deal creates largest listed fund group in Europe
* Aberdeen to pay for deal in shares, cash
* Aberdeen says full-year revenue up 24 percent
* Shares in Aberdeen surge more than 13 percent
By Chris Vellacott and Tommy Wilkes
LONDON, Nov 18 (Reuters) - Aberdeen Asset Management is to buy Lloyds' fund management arm Scottish Widowsfor about 660 million pounds ($1.1 billion), creating Europe'sNo. 1 listed stand-alone fund manager.
Aberdeen will pay with shares worth 560 million pounds, or9.9 percent of the company, and 100 million in cash over fiveyears depending on how well it manages various Lloyds assets.
Lloyds has agreed not to sell any of its stake for a year.
The deal raises Aberdeen's assets under management by morethan two thirds to 336 billion pounds, knocking Schroders into second place and offering it diversification intofixed income and property, where Scottish Widows is stronger.
Aberdeen chief executive Martin Gilbert, who stressed inApril that a bid for Scottish Widows was highly unlikely, saidthat adding its Solutions business, offering wealth managementproducts to Lloyds' customers, had clinched the deal.
"Our aim is to work with Lloyds to increase their marketshare in wealth management... It's the close relationship withLloyds customers that really attracted us to do this deal," hetold reporters on Monday.
Aberdeen shares surged 13.5 percent, helped byforecast-beating results showing a 24-percent rise in netrevenue.
Stuart Duncan, analyst at Peel Duncan, said the deal was"undoubtedly cheap on most measures". Aberdeen comments that thedeal would materially enhance earnings from the first full yearhad boosted the share price, he said.
Duncan said that based on the initial consideration Aberdeenhad paid just 5 times earnings, whereas its own stock trades ata multiple of 15 times earnings.
Analysts at Numis also said the deal looked well priced forAberdeen but they want to "seek clarity" on how much of ScottishWidow's assets will stay put and on the lock-up.
JOB LOSSES
For Lloyds, the deal lifts its Core Tier 1 capital by 11basis points from the 9.9 percent reached in the third quarterto a 10-percent target set by Britain's financial watchdog.Lloyds shares rose 0.9 percent.
Lloyds, which is 33 percent state owned, is selling offnon-core assets to strengthen its balance sheet and focus onlending to British households and businesses.
It needs to plug an 8.6 billion pound shortfall identifiedby Britain's financial regulator in June to persuade theregulator to let it start paying dividends again next year.
"We are confident that this transaction will deliverconsiderable additional value to our expanded client base andthis will therefore benefit our shareholders. I am delighted towelcome Lloyds as a major shareholder," Gilbert said.
Led by Gilbert, Aberdeen has seen a big rise in assets sincethe financial crisis, buoyed by demand for its global emergingmarket equities funds and a flurry of acquisitions.
Gilbert said there would be some job losses whereduplication existed. He declined to say how many would go.
Aberdeen released full-year earnings on Monday slightlyahead of market forecasts. Net revenue jumped 24 percent in theyear to Sept. 30 to 1.08 billion pounds.
Underlying pre-tax profits came in 39 percent higher, andAberdeen said it would pay a full year dividend of 16 pence pershare, up from 11.5 pence last year.
Lloyds (LLOY)
