Friends unite against rivals
Oct 25 2007 by Iain Laing, The Journal
MERGER partners Friends Provident and Resolution have sought to head off rival suitors by promising £1bn for shareholders next year. The insurers announced the proposed return of capital on the eve of the deadline for Standard Life and Pearl to say whether they intended to bid for Resolution, which is the UK’s biggest manager of closed life funds.
Friends Provident and Resolution shareholders are due to vote on the £8.5bn merger on November 5. The new firm will be called Friends Financial.
As well as next year’s return of capital from current resources, the new company will also look for another return by April 2009, this time to be financed from disposal proceeds of lower-return assets.
Chairman designate of Friends Financial Clive Cowdery said: "With less than two weeks until the merger votes, our focus remains on the compelling value for shareholders offered by Friends Financial."
Last week, Resolution snubbed a £4.8bn bid from its biggest shareholder, Pearl Assurance. Standard Life is also considering a potential bid after insurance group Swiss Re confirmed talks with Standard Life over the possibility of buying parts of Resolution, should Standard make an offer.
The Takeover Panel has given parties until tomorrow evening to launch full offers for Resolution or walk away. The latest twist in the saga came as Friends Provident announced results showing a 13% rise in UK new business sales to £3.42bn in the first nine months of the year. Group pensions drove the improvement, up 22% to £1.99bn, while annuity sales were ahead 12% at £210m. The cooler mortgage market meant protection sales slipped 3% to £311m.
Friends Provident life and pensions chief executive Ben Gunn said the merger with Resolution presented exciting additional opportunities.
"The board of Friends Provident has recommended that shareholders vote in favour of the merger."
The combination of Resolution and Friends is expected to generate at least £100m of annual cost savings, although the groups have denied this will lead to major job losses.
Resolution was formed in September 2005 from the merger of Resolution Life Group, set up in 2003, and Britannic Group.
In September 2006, Resolution acquired the life businesses of Abbey National, after growing on the back of acquisitions such as the UK arm of Swiss Life and the closed life insurance operation of Royal & Sun Alliance. It has seven million customers and invested assets of more than £61bn.
