Resolution closes Abbey deal

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The Independent Online

The financial services group Resolution finally sealed the deal to buy Abbey National's £26.5bn closed life book yesterday, unveiling plans to raise £1.54bn from a rights issue and a further £1.68bn via new debt facilities to help pay for the acquisition.

The deal will give Resolution its first footing in the open life and pensions market, and will propel the company into the FTSE 100.

Resolution will pay £3.5bn for the closed funds, and an additional £100m to secure the right to continue supplying protection and pension products for Abbey customers via the Scottish Provident brand. In return, Abbey, which is owned by the Spanish bank Santander Central Hispano, will have the exclusive right to market its banking products to Resolution's 5 million-strong customer base.

Although the auction for the assets was mired in some controversy - with the entrepreneur Hugh Osmond complaining he was unable to get Santander to talk to him - the Abbey managing director Javier Maldonado said his company had chosen Resolution because of the whole package it could offer.

The price - equivalent to 97 per cent of the book's embedded value - is at the top end of the scale for deals in the sector, but Resolution chief executive Paul Thompson said it was a more competitive deal than it at first appears. Once the funds' surplus capital and increases in value since their last valuation had been accounted for, the deal would be equivalent to around 87 per cent of EV, he said.

Mr Thompson said the group expects to pay down its debt quickly, and it would be in a position to carry out another sizeable deal in 2007 if the opportunity arose. There are, however, a diminishing number of large closed life books on the market, and Resolution is also eyeing open life insurers with a view to closing parts of their business down.

Shares in the company rose more than 3 per cent yesterday to close at 697p, giving the company a market value of £2.5bn.