UK - Financial services group Resolution plc has dropped plans to merge with UK life assurance group Friends Provident and has instead agreed to sell the company to Standard Life, but rival Pearl has also come back at the 11th hour with a fresh takeover bid topping Standard's offer.

A swift turn of events today saw Resolution announce it has now agreed to sell the company to the Edinburgh-based insurance group Standard Life, rather than follow its original proposal to merge with Friends Provident and create Friends Financial plc, as it believes the deal worth £4.9bn (€7bn) would be a better for shareholders.

But just 40 minutes later, a new all-cash bid for Resolution was also announced on the London Stock Exchange by Pearl Group, valuing the company at 720p a share or £4.94bn - just a fraction more than Standard Life has offered.

There has been frenetic activity between Resolution and bidders over the last week, as the UK's takeover Panel first extended a bid offer deadline to 5pm yesterday (Thursday 25 October) and then extended it again to 12pm today (Friday 26 October) once Resolution entered into talks with Standard Life.

Under the terms of this latest agreed deal, Standard Life will acquire Resolution Asset Management, Scottish Provident, Scottish Mutual Assurance, Phoenix Life Assurance, Scottish Mutual International and Scottish Provident International - all of which are predominantly retail financial services operations.

If the deal is accepted by shareholders and completed, Standard Life will sell some of the existing Resolution businesses - Phoenix Life, Phoenix Pensions, Phoenix & London Assurance and Resolution Management Services - to reinsurance giant Swiss Re for £2.35bn, giving Swiss Re its first foray into the UK life insurance space.

This would be a significant shift from the earlier merger proposal with Friends Provident at that deal would have seen Resolution Asset Management - a division which is largely retail-driven in its strategy - technically taken over by F&C Asset Management, given F&C is also technically a separately-listed entity to Friends Provident.

Resolution has been hit with a £49m fee for breaking the deal with Friends Provident, but Standard Life has already agreed to pay this on their behalf.

It is now unclear whether Resolution will also consider the latest Pearl offer - two previous offers have already been rejected - but Pearl is continuing to push for its bid as it has also purchase a further shareholding of Resolution plc and raised its total investment in the company to 24.1%.

Resolution has 60 days to discuss the potential takeover with Standard Life.

Topics