Resolution ponders Standard Life's £4.9bn bid

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The Independent Online

The board of Resolution was meeting last night to decide on its response to yesterday's last-minute £4.9bn takeover approach from Standard Life.

Standard Life proposed an offer of 517p a share in cash and 0.715 Standard Life shares for each Resolution share. At yesterday's closing price, that would make the offer worth 714.5p a share.

For the offer to be made formally, Standard Life wants a recommendation from Resolution's board.

A deal would scupper the merger between Resolution, the closed life-fund operator, and Friends Provident, the life insurer, agreed in July. The Takeover Panel had given Standard Life until 5pm yesterday to submit a bid, but it gave the companies an extension until midday today so the Resolution board can consider the proposal.

Standard Life said a deal with Resolution would create "very significant value" for both companies' shareholders. It would take Resolution's asset management and protection businesses and sell the closed life insurance funds to Swiss Re, the world's biggest reinsurer, which operates more than 40 of these funds. Resolution's advisers will assess the value of the bid to shareholders of cost savings, asset management synergies and new business.

Analysts said Resolution might well reject Standard Life's approach, especially as its value could fall if Standard Life's share price continues to drop.

Resolution's chairman, Clive Cowdery, has said any offer that breaks up the deal with Friends Provident would need to be "compelling".

Standard Life's approach tops a firm 691p-a-share hostile bid by Hugh Osmond's Pearl Group, though the Pearl offer is all in cash. Resolution rejected the Pearl offer last week.

The company has waited a long time before finally getting involved in the battle for Resolution, which has been going on for three months. It had considered joining up with Pearl, but was taken by surprise when Pearl enlisted Royal London, a mutual insurer, as its partner for Resolution's active businesses.

With its firm bid already on the table, Pearl is free to increase its offer but would have to act quickly if Resolution sticks with Friends Provident, because shareholders are due to vote on that deal in the next few days. Resolution and Friends Provident are due to hold shareholders' meetings on 5 November and proxy votes would need to be in well before that date.

Pearl is Resolution's biggest shareholder with a 16.5 per cent interest in its rival and has said it will vote against the Friends merger.

Standard Life shares fell 1.25 per cent to 276.25p, their lowest price for more than a year. Resolution shares rose 0.4 per cent to 709.5p.