Standard Life 'could up bid for Resolution'

The Scottish group's 716p-a-share bid looked dead in the water on Friday when rival Pearl lifted its offer to 720p. However, Standard today said it could come back with more cash, although it would seem to be facing an uphill struggle.

Resolution confirmed that it has withdrawn its support for the Standard offer, the second time it has been forced to abandon an agreed deal in recent weeks.

Its earlier merger with Friends Provident had to be ditched once Standard and then Pearl entered the fray.

Pearl now holds 24% of Resolution, enough to block almost any rival offer.

Resolution acknowledged in a statement today that it "does not believe the offer from the Standard Life consortium is capable of being implemented without the support of Pearl".

This leaves Standard chief executive Sandy Crombie in an awkward position. Effectively, he has to increase his offer for Resolution to more than the amount Pearl thinks the company is worth in order to win.

Pearl's Hugh Osmond, co-founder of Pizza Express, believes that it makes far more sense to merge his company with the similar Resolution. Both are " zombie" funds that run closed books of insurance funds. Standard Life, on the other hand, would look to pass Resolution's zombie business to Swiss Re while taking a fee for managing the money.

Standard's current deal is a "scheme of arrangement" that requires the backing of 75% of shareholders.

It said today that one possibility is to proceed via a straightforward takeover, which needs only 50%.

Resolution, led by Clive Cowdery, will be asking Standard Life to clarify its intentions.

Standard Life shares today fell 1p to 2771/2p, further hurting the value of its bid, which comprises 517p in cash and 0.715 new shares.

Keefe, Bruyette & Woods said in a note today that any move by Standard to increase its bid will knock the shares.

"Given the strength of the Pearl position, we believe that in order to be successful, Standard Life would have to increase its bid significantly, creating a larger de-rating situation," said the broker.

KBW argues that Standard's bid failing has "the highest probability".

Resolution added 1/2p to 727p. It could now choose to recommend the Pearl offer, but is likely to wait and see what else emerges in the next few weeks before racing into bed with another new partner. Cowdery would get about £150 million from the sale of the company at current prices.

Standard Life abandoned its mutual status in the summer of 2006, joining the stock market at 230p.

The shares soared above 300p but have fallen back sharply since the company became involved in the bidding for Resolution.