Cowdery seeks shareholder help to secure Friends deal

Clive Cowdery's Resolution wants to galvanise Friends Provident shareholders into pushing the life insurer into a deal with his company.

Friends yesterday rejected his most recent proposal as "wholly inadequate" and terminated talks with the controversial insurance entrepreneur.

The two sides have been in discussions for weeks over a possible deal but Friends remains deeply unhappy with the Resolution proposal, not least because of concerns about Guernsey-based Resolution's governance and the lucrative, private-equity style packages its directors enjoy.

Resolution's most recent proposed deal valued Friends at £1.7bn and contained £500m of cash sweeteners designed to buy off a quarter of a million retail shareholders, most of whom received their stakes when Friends joined the Stock Exchange after being a policyholder-owned mutual. However, Mr Cowdery has refused to move on the governance issues.

Resolution said last night: "Following Friends Provident's announcement, Resolution is considering its position on the relative attraction of Friends Provident, as compared to other opportunities within the expected wider consolidation of the UK life sector, and will be further consulting with shareholders."

Mr Cowdery is banking on the large number of City institutions who hold shares in both companies trying to force a deal. It is understood that he has not ruled out putting an offer directly to them in the form of a hostile takeover bid. That would be seen as the nuclear option, however, and he is hoping that pressure will be privately applied to force a deal.

Mr Cowdery wants to use Friends as a vehicle to launch a string of deals that will bring together several life insurance companies.

Friends has the option of approaching the Takeover Panel and asking it to issue a "put up or shut up" notice to Mr Cowdery, which would set a deadline for him to either table a formal offer or walk away, although this step is not likely to be taken soon.

Friends Provident has said it remains open to consolidation in the British life insurance industry, and analysts believe that talks could yet be reheated, although Mr Cowdery would need to come up with more money.

Friends has issued its own proposal which would see Friends taking over Resolution and bringing it back onshore without the controversial remuneration packages set up for Mr Cowdery and his colleagues. Resolution rejected that out of hand.

Yesterday Friends Provident shares closed at 72.2p, up 1.4p.