Four insurers, two deadly rivals - but there can only be one zombie king

Personal enmity underlies a bruising bid battle in the closed life insurance market. Simon Evans takes a ringside seat
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The Independent Online

2007 has certainly been the year of the protracted bid battle. The London Stock Exchange chief executive Clara Furse successfully fended off Nasdaq's advance after a six-month tussle, while Royal Bank of Scotland's Sir Fred Goodwin finally got his hands on the "prize" of ABN Amro, beating his rival at Barclays, John Varley, in the process.

But one bitter bid imbroglio rumbles on in the shape of the four-way tussle between the insurers Resolution, Pearl, Standard Life and Friends Provident. At its heart are two of the City's most successful figures: Resolution's Clive Cowdery and Pearl Group's Hugh Osmond, with the latter now seemingly poised to gobble up his rival's company in an audacious coup that once would have sounded fanciful.

With an end game in sight and the stakes so high, it's little wonder that rivalry between the two bosses has spilled over into personal enmity. To borrow the industry name for the closed pension funds that are being fought over, there can be only one "king of the zombies".

"They can't stand each other – it's pretty obvious," says one source at the heart of the bidding saga.

Cowdery, 44, may now be the reigning godfather of the closed life fund business but, as an old boy of Clevedon comprehensive school in Bristol, his rise to the top was from humble beginnings. In contrast, the pretender to the crown, serial entrepreneur Osmond – best known for his purchase and sale of the Pizza Express chain – enjoyed an altogether more privileged upbringing.

Cowdery, hardly recognisable these days after shedding pounds on a recent fitness regime, left school with no A-levels. Insiders say he wears his background as a badge of honour. The fiercely private Osmond cruised to a place at Oxford University, intent on following family footsteps to read medicine. Instead, he ditched the white coat for the pinstripes of a wheeler-dealer. In true roll-up-your-sleeves fashion, the fiercely self-motivated Cowdery began his career as an insurance salesman in Cornwall and quickly proved his worth before moving into a consultant role, a position with the Rothschild family and then a job with the conglomerate GE. From here, he spotted the opportunities presented by the closed life market, eventually becoming chairmanof Resolution.

Osmond's first job was at an investment bank in Madrid, after which he star-ted out on the entrepreneurial road, buying a shell company and then scooping up an ailing Pizza Express for a meagre £15m. It fetched £560m when it was taken over by private equity predators last year.

The obscure graveyard of the closed life fund arena was to be the battleground on which these two contrasting careers collided. After securing £1bn worth of closed life assets from Royal & SunAlliance and Swiss Life in 2004, Cowdery set his sights on an outflanking of Osmond, who was in the box seat to buy the closed life assets of HHG, now known as the Henderson Group.

Osmond won out but only after paying top dollar for the assets, with the intervention of Cowdery purportedly adding millions to the eventual price tag.

Fast forward to the spring of last year and the next battleground for the two protagonists was the sale of £29bn worth of closed life assets at Abbey. The winner this time was Cowdery, securing a £3.5bn deal, with Osmond cognisant of any offer only at the last minute. He was said to be furious at being cut out.

"Osmond was badly caught out on this," says one analyst. "The competition between the two was ratcheted up a couple of notches."

Since Abbey, the duo have been linked to each and every closed life offering available, including Scottish Widows and Prudential's back books. Still jealously guarding his personal privacy, Osmond nevertheless seemed to accept the need for a more open approach, giving media interviews and putting a spin machine into action.

Cowdery's modus operandi is similarly intriguing. His relationship with Resolution's chief executive, Paul Thompson, had always been frosty. Indeed, it is rumoured that at a launch of a boutique fund offering in the upmarket department store Harvey Nichols, the pair went to almost comical lengths to avoid each other. In March of this year Thompson was ousted, walking away with a healthy £8m payoff.

Just four months later, the relentless Cowdery was back deal-making, this time tabling a daring £8.5bn "nil premium" merger offer to join forces with ailing life assurer Friends Provident. The deal would net him £150m personally. The terms of the offer hardly had the City jumping for joy, but it looked as though Cowdery had once again outflanked his opposite number at Pearl. Or had he?

Stealthily building up an 11.3 per cent holding in Resolution through a mixture of derivatives and shares, Osmond was never going to let Cowdery add to his empire without a fight. By August, Pearl had amassed 16.5 per cent of Resolution, in effect blocking a bid for Friends Provident and paving the way for a potential takeover of Resolution itself. As of last week Pearl held more than 24 per cent of the stock. Oh to be a fly on the wall in Cowdery's office when news broke of Osmond's stake-building.

The saga has now turned messy. Another insurer, Standard Life, has entered the fray with a ham-fisted effort that has incurred the ire of the Takeover Panel and seems unlikely to succeed.

Pearl, in conjunction with Royal London, has advanced three offers for Resolution, moving from an original 660p a share to its current 720p a share. Unlike the 715p offer tabled by Standard Life, none of Osmond's offers has been recommended to shareholders by Cowdery.

"Pearl has played a very canny game," says Kevin Ryan, insurance analyst at ING. "Whether it be the bankers or Osmond himself, the way they've approached this offer has been spot-on. Standard Life could learn a thing or two."

According to Tony Silverman from Standard & Poor's Equity Research, the deal is now Osmond's to lose. "My guess is that Pearl will get it," he says. "Sure, it's got quite personal and, on the face of it, the prospect of Cowdery and Osmond agreeing on anything seems remote. But remember that Cowdery has cashed in half his holdings already. Certainly if Pearl wins, Cowdery will go – there's no chance of them ever sitting on a board together."

The insurance industry guru Ned Cazalet last year described the machinations of the zombie world as a game: "It's a question of Pac-Man – who will eat who?"

If Osmond eventually manages to take the industry throne by gobbling up Resolution, that will be one dish likely to slip down rather well.

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