Two weeks ago it was "no, no and thrice no" as Friends Provident appeared to slam the door on an unwanted takeover approach from Clive Cowdery's Resolution. The 177-year-old Quaker-founded life insurer's spin doctors talked up the strength of its resolve while directors boldly proclaimed that they had taken the decision in the interests of all Friends' shareholders, not just the clique of institutions that have spent a small fortune backing Cowdery's new venture and have been pushing for a deal.
Yesterday the very same directors were back around the table discussing surrender terms. They have extracted something from the deal, Friends shareholders will get a slightly bigger piece of the Resolution pie. But if there are any changes to Resolution's eccentric corporate governance arrangements (it's based in Guernsey and allows for Mr Cowdery and his mates to make private equity style bonuses that would make even bankers envious, if they meet "stretching performance targets") they will be cosmetic at best. Mr Cowdery has won the day.
The two leading shareholders in Resolution – Scottish Widows and Aviva – are the two leading shareholders in Friends Provident. Between them they hold just over 16 per cent in each. Other names featuring prominently on both shareholder registers include the likes of Legal & General, Invesco and Barclays Global Investors.
Mr Cowdery indicated at the time the door was closed on him that he would seek to enlist the support of these and other institutions to prise it open again. Its a time-honoured tactic that rarely proves successful.
On this occasion, however, it has proved to be quite spectacularly effective.
It appears that Friends was told by its investors to set aside its concerns about Resolution's governance – a major reason for its rejection of Resolution's advances in the first place – and to instead focus solely on value.
The cricket sponsor was bowled middle stump because the message was clear: We want this deal. Get it done. It would take a very strong board to set itself against such a demand and it seems that this board is not nearly strong enough. Of course we don't know who applied the thumbscrews. As ever, the fund managers aren't saying and neither is Friends.
But it all looks a deeply unsavoury City stitch up in favour of Cowdery, who now has a bona-fide life insurer on board which he can use as a platform for further deals, and the institutions, which need him to do this to justify ponying up the cash in the first place. Don't cry any tears for Friends management either, they will all keep their jobs under Mr Cowdery's plans, probably at greatly enhanced rates of pay.
Over the weekend, FSA chief executive Hector Sants finally found the gumption to pass a buck back to the Government over bankers' bonuses.
He said that while the regulator could wag its finger at the banks over remuneration policy, it had no power to intervene in the amount they actually pay to their high-flying staff. That is a matter for politicians and, crucially, for shareholders. The role of the shareholder has also been highlighted by Sir David Walker in his review into banking governance. He too wants institutional shareholders to be more active, calling upon them to act like responsible owners of the assets in which they invest on behalf of their clients and to engage in responsible stewardship. Based on what has happened at Friends, it seems there is not much hope of this happening anytime soon. We might have had a banking crisis that has brought the economy of this country to the brink of collapse, but normal City service has resumed.
As for Friends policy holders, locked into long term contracts, they have no choice but to lump it.Reuse content