UPDATE 1-Standard Life ramps up fund business with Ignis acquisition

(Corrects paragraph 11 to show Keith Skeoch is CEO of Standard Life Investments, not Standard Life (LSE: SL.L - news) )

* Standard to pay Phoenix Holdings (Tel Aviv: PHOE1.TA - news) 390 mln stg in cash

* Ignis had 59 bln pounds in AuM at end-Dec.

* Standard Life Investments' 3rd-party assets now two thirds of total

By Simon Jessop and Chris Vellacott

LONDON, March 26 (Reuters) - Standard Life has bought Ignis Asset Management for 390 million pounds ($643.7 million), increasing the amount of money it manages by one third as it shifts its business to fund management from insurance.

The deal comes a week after the British finance minister overhauled the country's pensions and savings industry in a series of changes that are expected to prompt other insurers to expand their fund management arms.

Standard Life's investment business passed a milestone in 2013 when the amount of money it ran for external clients exceeded the group's own funds. The purchase of Ignis from Phoenix Holdings means Standard Life will manage almost two thirds of total funds for external clients.

Standard Life shares were the biggest gainers on the FTSE 100 index, up 4.7 percent and on course for their biggest daily gain in nearly a year.

Before the deal, Standard Life Investments managed 184 billion pounds of assets while Ignis managed 59 billion.

Revenue from managing third-party assets will rise to 81 percent of the total as a result of the deal, Standard Life said.

Standard said the deal, which would be funded by existing cash resources, valued Ignis at 7.5 times 2013 earnings before interest, tax, depreciation and amortisation (EBITDA) before synergies, or around 0.7 percent of Ignis' assets under management (AuM).

That compares with the 0.9 percent of AuM paid by Bank of Montreal in its recent purchase of F&C Asset Management (Other OTC: FCAFF - news) .

" This purchase price is very much in the range that we expected and appears an attractive proposition for Standard Life as it moves comprehensively towards the asset accumulation/management model," said Shore Capital analyst Eamonn Flanagan.

The deal would result in cost savings exceeding 50 million pounds by the third full year of ownership, Standard Life said. One-off costs are expected at around 75 million pounds.

There would be some job losses, Standard Life Investments Chief Executive Keith Skeoch said in a conference call.

Standard said the deal would result in an enhanced earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 45 percent by 2017.

Ignis earned revenue of 150 million pounds and generated EBITDA of 52 million pounds in 2013.

($1 = 0.6059 British Pounds) (Reporting by Simon Jessop; Editing by Erica Billingham)