Standard turns to policyholders ahead of flotation

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The Independent Online

Standard Life policyholders will be invited to buy extra shares in the run-up to the company's flotation this summer as the insurer looks to bolster its balance sheet.

Up to 7 million customers, not all of whom get a windfall, are likely to be asked to buy new shares in the business as senior management attempt to secure a loyal base of retail shareholders.

City analysts believe Standard will want to persuade as many small investors as possible to take up the offer, allowing it some leeway before it comes under the control of bigger institutions.

Standard is looking to raise between £1bn and £2bn in the float to fund expansion plans and beef up its bank balance, it is thought.

It has yet to confirm the exact amount it wants to raise, but is in talks with its advisers, Merrill Lynch and UBS. Scott White, Standard's chief spokesman, declined to comment yesterday.

From 18 April, members across the world will begin to receive documents indicating how big a windfall they are to receive in return for giving up membership rights.

About 2.4 million members who own with-profits policies will get a fixed payment plus a variable amount depending on the size of their fund.

Another 4.5 million savers with non with-profits policies may also be invited to buy shares in Standard Life.

Analysts speculate that the fixed payment will be between £250 and £500, with the total average windfall worth somewhere between £500 and £1,000.

Standard hopes to create a strong demand for the shares. Management have noted revived investor interest in the sector following Aviva's failed bid for the Prudential.

Standard is poised to launch a marketing campaign to persuade members to vote at the special general meeting on 31 May.

It needs 75 per cent of those who vote to be in favour of demutualisation, but is also keen that more than 1 million of its with-profits customers take an interest.

City analysts think it will cost £250m in fees to float Standard Life. The company is likely to be valued at between £4bn and £6bn.

There has been vague talk in the City that a bid may emerge for the company.

It seems likely that any would-be bidder will want the company to complete the hugely complex task of demutualising before making a move.

Standard has moved in recent times to make its board more acceptable to the City.

Speculation about further changes centres on its chairman, Sir Brian Stewart, who holds the same position at Scottish & Newcastle.

He may have to choose between the jobs to satisfy corporate governance rules.

James Crosby, the departing chief executive of HBOS, has been tipped to replace Sir Brian.