Pearl trumps bids for resolution

Standard Life’s £4.9bn (€7bn) bid to land insurer Resolution was dealt a major blow today after the firm’s largest shareholder stepped in with a higher offer on a dramatic day in the City.

When the day began, Resolution was still in favour of an £8.5billion merger with life and pensions firm Friends Provident, but switched its allegiance to Standard Life just ahead of a midday Takeover Panel deadline.

Standard Life’s offer for the UK’s biggest manager of closed-life funds was then trumped by a 720p-a-share pitch from privately-owned Pearl Assurance, pricing Resolution at £4.94bn (€7bn).

Pearl has also upped its stake in Resolution to more than 24% – meaning it is now in a position to all but veto the Standard Life offer, which needs approval from 75% of Resolution’s shareholders.

Resolution told its shareholders to “take no action” after Pearl announced its higher offer proposals – its third approach for the company in two weeks.

Pearl, which is owned by financier Hugh Osmond, highlighted that Standard Life’s offer was “uncertain” because almost a third of its bid was made up in shares, exposing Resolution’s shareholders to “significant downside risks”.

It added: “Standard Life is exposing itself to a highly competitive market in which it has no track record.”

Pearl has requested a meeting with Resolution’s board to gain a recommendation for its latest approach.

But Standard Life said it would become one of the UK’s leading life and pensions firms with about seven million customers if its bid won through.

Chief executive Sandy Crombie, who oversaw the stock market launch of Standard Life last year, said the takeover would “significantly expand” its UK operations.

The company plans to keep almost all of Resolution’s new business capacity, including its asset management operations and protection business for financial products such as mortgages.

It will also gain access to a potential two million new customers through more than 700 branches of mortgage bank Abbey, which has a distribution agreement with Resolution.

Standard has also agreed to sell Resolution’s “zombie” life insurance businesses, which are closed to new members, to insurance group Swiss Re for £2.35bn (€3.35bn).

Collins Stewart insurance analyst Tim Young said: “Standard Life is principally interested in Resolution’s open protection business, bank distribution and asset management, and adding economically profitable customers to its administrative platform.”

Just two days ago, Resolution and Friends Provident announced plans to return £1bn (€1.4bn) to shareholders following the merger – an attempt to ward off rival suitors.

Shareholders of both firms were due to approve the deal in less than two weeks’ time, and Resolution chairman Clive Cowdery said on Wednesday that his focus remained on the “compelling value” for shareholders offered by tie-up, creating a new company called Friends Financial.

Friends Provident, which will receive £49m (€70m) in break fees following the end of the merger plans, said it “continued to have confidence” in its prospects.

The company said it had about £1bn (€1.4bn) in surplus capital and would not need to issue new shares to fund growth plans.

It added: “(Our) UK life and pensions business continues to build strong market positions and has delivered a track record of growth.”