Resolution launched a dramatic bid last night to gatecrash the financial restructuring package announced this month by Bradford & Bingley, with a deal that would see it take control of the mortgage lender.
The financial services company is representing a group of B&B investors that would in effect become its biggest shareholder, with the mortgage bank subsequently slated to become a vehicle for consolidating the smaller players in the banking sector.
Resolution said "leading investors" in B&B had invited it to put forward plans for a £400m investment in the mortgage bank. The money would come from the four shareholders with which Resolution has so far held discussions: Insight, Legal & General, Prudential and Standard Life. Adding in B&B shares controlled by Clive Cowdery, Resolution's chief executive, the group owns around 20 per cent of the mortgage lender, giving it a strong foothold from which to build support.
The idea is that after winning control of B&B, Resolution would use the bank as a vehicle through which a restructuring of smaller banks and other lenders could take place over the next two years.
Under Resolution's proposals, B&B would scrap its plans for a rights issue and a capital investment from the US private equity firm Texas Pacific Group (TPG). The B&B investors in the Resolution group would thenput up the £400m the mortgage bank has said it needs to raise.
Under the existing deal with TPG, the US private equity firm would invest £179m in return for a 23 per stake in Bradford & Bingley. A rights issue will raise a further £258m. But the agreement has proved controversial, with leading shareholders and groups such as the Association of British Insurers complaining that the private equity firm is being offered preferential terms.
Sources close to Resolution said the plans put forward last night were the culmination of that dissatisfaction. "The really great story here is public market investors fighting back, not accepting an option put to them by the company as the only option on the table," one said.
Resolution said it would formally table its proposal by 4 July, three days before B&B shareholders are due to vote on the TPG plan. It will spend the next fortnight trying to persuade other shareholders of the merits of its plan.
The move by Resolution represents a new departure for the financial services group, which has previously focused on the insurance sector.
Having launched Resolution in 2003, Mr Cowdery built the company into a £5bn concern specialising in closed-end insurance funds, but most of its assets were sold to Pearl Group in May.
Mr Cowdery retained the Resolution brand name, and hasbeen researching projects in other areas of the financial services sector. He is understood to have been planning severaldeals in the autumn before being approached by B&B investors.
Resolution said yesterday that the smaller end of the banking sector required a £2bn capital investment to bring together smaller lenders in order to cut costs and boost access to wholesale funding. The company is understood to have targeted around 15 other lenders for consolidation.
A spokesman for B&B said it was prepared to talk to Resolution but could not accept Mr Cowdery's proposals in their current form.Reuse content