Pearl increases its share of Resolution

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The Independent Online

Hugh Osmond's Pearl yesterday ratcheted up the pressure on rival life insurer Resolution by further boosting its stake in the company to 15.85 per cent.

Pearl bought an 11.28 per cent stake on Thursday night in a "dusk raid" on its rival, and added to its interest throughout yesterday through both share purchases and derivatives.

The company has said it will oppose the Resolution's attempt to pull off an £8bn merger with Friends Provident saying it believed "there is potential for more value to be created for Resolution shareholders through pursuing strategies similar to those that Pearl has applied to its own business".

That could ultimately lead to a cash offer for Resolution from Pearl, using money secured against the two businesses' future revenues, despite Pearl being just a third the size of Resolution.

Pearl - a closed life insurance business like Resolution - is nearing a blocking minority that could wreck the Friends merger. The deal needs 75 per cent support because it is being accomplished via a scheme of arrangement.

Resolution shareholders, including Morley Asset Management, want talks with Pearl.

It is understood that the two sides will meet next week. However, pulling off a successful deal will be difficult for Pearl. Its boss Hugh Osmond and Resolution founder Clive Cowdery are hardly on the best of terms.

The former was nettled by the latter when Resolution intervened by bidding against Mr Osmond in the battle for Pearl, requiring him to pay more than he might otherwise have had to.

Shore Capital analyst Eamonn Flanagan said a deal between the two would be "fraught with transaction risks" not least because of potential personality clashes.

However, he also said Friends was likely to be the subject of a counter-bid. AXA is still viewed as the most-likely to make a counter-bid for Friends.

The French insurer's UK business is viewed as subscale and has drifted in recent years.