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Friends Provident shares rallied 10% as hope sparked of a bidding war for the 177-year-old insurer.
The former mutual rejected a £1.7 billion all-share offer from Resolution today, describing the offer of 0.8 new shares for every Friends share as “wholly inadequate”.
Resolution is now trying to persuade 750,000 small investors in Friends that it can be trusted to take charge of the business.
“Resolution received constructive feedback from Friends Provident and its advisers and is considering its response,” read a statement, suggesting that it thinks success hinges largely on naming the right price.
Crucially, Resolution recognised that it needs to offer cash rather than just shares to secure the deal, and that it may need to commit to paying dividends to win over investors.
“The Resolution board recognises that Friends Provident has a broad shareholder base, including retail investors and investors who have a preference for receiving income,” said the statement.
Friends shares climbed 6.56p to 66.69p.
Resolution was founded by insurance guru Clive Cowdery who made a fortune from buying up troubled insurers, closing them to new business and running the old books of funds. This earned them the tag of “zombies”, a description not all appreciated.
Some will wonder if Resolution is the right outfit to take charge of a company founded in 1832 as a friendly society for Quakers. It joined the stock market in 2001, but has found life as a public company difficult.
It has already tried to sell itself at least once, agreeing a deal with Cowdery's first takeover vehicle — also confusingly called Resolution — in 2007. The deal failed.
Friends also raised reservations about Resolution's structure. It is based in Guernsey for tax purposes and run as a limited partnership that sees management take 10% of any profits. That management, controversially, includes former Financial Services Authority (FSA) boss John Tiner.
Cowdery was only recently cleared by the FSA of impropriety relating to a deal done with Hugh Osmond's Pearl Assurance.
Resolution was keen to stress today that Friends is far from the only game in town.
It is “assessing possible transactions with several UK life assurance companies, including both listed and privately-held groups with a view to achieving consolidation”.
That could include offers for Legal & General or Scottish Widows.
