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'Hope over reality': Pearl scorns Standard Life bid

Jon Mainwaring
Sunday 28 October 2007 00:00 BST
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Standard Life's continuing attempts to buy fellow insurer Resolution represent "a triumph of hope over reality" now that rival bidder Pearl Group has built up a sizeable stake in the business, a spokesman for Pearl has said.

Pearl believes it needs a 25 per cent stake in Resolution to scupper Standard Life's bid, and by the market's close on Friday it had accumulated 165,983,600 Resolution shares – around 24.18 per cent of the business.

But Peter Eliot, an analyst at MF Global Securities, believes the deal could still be repackaged. "There's certainly a concern there but Resolution can reverse the scheme's structure," he says, explaining that the deal could be arranged so it needed only 50 per cent of Resolution's shareholders to approve it.

Despite this, Mr Eliot thinks Pearl will probably win the day. "To have a permanent 25 per cent minority would not be attractive," he says, adding that such a stake could potentially be used to block the disposal of certain assets even if a Standard Life and Resolution merger went ahead.

Early on Friday, Pearl released a statement to the Stock Exchange describing the proposed takeover of Resolution by Standard Life as a "poorly conceived" acquisition that would have a "very limited strategic fit". Among its criticisms were Standard Life's "failed" attempts to build a profitable UK protection business, limited cross-selling potential into Resolution's closed life funds and a lack of scope for Standard Life to deliver cost savings to Resolution's life and pensions business (whose administration has already been outsourced).

Pearl also increased its own bid for Resolution with a cash offer of 720p per share – a premium of 4.2 per cent over its previous offer of 691p.

In response, Standard Life issued a statement saying it was confident its recommended offer for Resolution – including its share component – "will create significant and superior value for both Standard Life and Resolution shareholders".

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