£3.6bn Abbey deal sealed

A manager of closed life assurance funds moved in on a place in the FTSE 100 Index after striking a £3.6bn (€5.2bn) deal with Abbey National today.

A manager of closed life assurance funds moved in on a place in the FTSE 100 Index after striking a £3.6bn (€5.2bn) deal with Abbey National today.

Resolution will pick up the businesses Scottish Mutual, Scottish Provident and Abbey National Life, as well as two offshore life companies.

The company has grown rapidly on the back of acquisitions such as the UK arm of Swiss Life and the closed life insurance operation of Royal & Sun Alliance.

And last June it created a group with around six million policies after agreeing a £1.8bn (€2.6bn) merger with Britannic.

But Resolution also signalled its interest in other targets and is thought to have made a failed merger approach to Standard Life earlier this year.

It is expected that 2,000 Abbey employees will transfer as part of the deal, with Resolution continuing to operate the life operations from existing Abbey premises in Glasgow. Resolution said a former RSA operation in Liverpool, employing around 100 people, would close with its responsibilities transferred to the company’s other operations at Wythall, Worcestershire.

Resolution is currently worth £2.44bn (€3.5bn) and is expected to win a place in the Footsie following the Abbey deal, which it will part fund through the issue of new shares raising around £1.5bn (€2.1bn).

As well as providing shared services across various group funds, Resolution offers cost effective services to companies that wish to exit or outsource the administration of life and pensions business.

Resolution said it believed there were opportunities for further acquisitions as it looks to leverage advantages from holding a larger scale.

Completion of today’s deal is expected in the third quarter of 2006 and is dependent on approval from the Financial Services Authority, regulators and Resolution shareholders.

Abbey said it had also entered into two agreements with Resolution, including as distributor of Scottish Provident protection products to intermediaries.

Abbey has also secured exclusive access to provide retail banking products to Resolution’s estimated five million policyholders.

Chief executive Francisco Gomez-Roldan said: “This is a great deal for Abbey, for our employees and for our customers.

“We have sold our life businesses for an excellent price and ensured continuity of service and product.

He added: “We believe Resolution has the expertise, strength and focus to manage the life businesses going forward and this deal provides a clean exit for Abbey allowing us to focus on building our banking business in the UK.”

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