The City was dubbing it the Battle of the Zombie Kings today after Hugh Osmond's Pearl Group said it will float on the London stock market, following hard on the heels of his arch-rival Clive Cowdery, who floated his Resolution late last year.

Cowdery, 45, sold his first Resolution group of closed life companies to the pubs-to-pizzas tycoon Osmond, 47, for £4.9 billion just over two years ago.

He beat Osmond with his return to the stock market of a new Resolution when he raised £600 million from investors last December.

But last month the Financial Services Authority launched an investigation into Cowdery and the £4.9 billion deal with Osmond. That has effectively put Cowdery's plans to consolidate financial services businesses on hold until the inquiry is completed.

Pearl is now raising £500 million from institutional investors ahead of its flotation, which is expected to value it at around £2 billion.

It is also negotiating with its 17 banks, led by Lloyds Banking Group, over a restructuring of its £3 billion of debt. The banks may choose to convert some of that debt into shares.

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The plan is to float Pearl in the autumn. It is not expected to raise further cash then but will have quoted shares, which it will be able to use to buy up more closed life companies.

Pearl already owns five so-called zombie funds, London Life, Phoenix, Scottish Mutual International, NPI and, of course, Pearl. These are life companies which have closed to new business but still own billions of pounds of investments which are paying out to policyholders for years to come.

Osmond's bet is that by the time all policyholders have finally been paid out there will still be huge residual value in the funds.

But the crash in financial markets has seen the value of zombie funds plummet. Pearl has passed all the stress tests set it by the FSA but is keen to reduce its level of borrowing.

The group said: “We are in a market full of opportunities, but one in which the debt-funded acquisition model which served Pearl and others so well in the past is simply no longer appropriate.

“We believe that the combination of substantial scale, robust capital strength, strong cash generation and the listing should cement Pearl's position as the pre-eminent closed fund consolidator in the UK market.”

Analysts reckon that there could be as much as £1 trillion worth of closed life funds potentially up for sale. Regulators are said to be keen to see them consolidated so that they end up in safe and reliable hands.

Osmond, who made his first fortune at PizzaExpress, is playing hardball with some of Pearl's existing bondholders. Two weeks ago he suspended payment of a £33 million coupon on £500 million of bonds. He also said Pearl was considering an offer to buy back the bonds at just 121/2p in the pound. Today he said Pearl Group's fundraising would have no effect on these plans, which will be put to a meeting of bondholders early next month.

Pearl is jointly owned by Osmond's Sun Capital and Mayfair-based private-equity group TDR. Pearl manages some £73 billion of funds on behalf of 7.7 million policyholders.