Refuge attempts to avert revolt on United merger

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The Independent Online
Senior executives at Refuge Assurance, the insurer, will today meet with Perpetual, the fund manager and one of its largest single shareholders, in an attempt to avert a threatened vote against the planned pounds 1.4bn merger with United Friendly.

The meeting will be held to discuss Perpetual's claim that Refuge shareholders are getting a raw deal from the merger, which undervalues the company by up to pounds 500m. But Neil Woodford, fund manager at Perpetual, said yesterday that if the talks did not resolve the significant worries he had over the exact terms of the merger, he would vote against it at a special shareholders' meeting on 9 September.

"I will make my own mind up in the light of what is said and the discussions we hold with Refuge. My position now is that this merger is a bad deal for shareholders and should not be supported," Mr Woodford said.

"I do not know how other shareholders might react. The position is that since I made my opposition known, a significant number of small shareholders have been in touch to say they agree with my arguments. Some other fund managers with larger holdings also have reservations. The meeting itself requires a simple majority for it to succeed."

Mr Woodford's comments follow a wrangle between Perpetual and Refuge over the exact proportion of so-called "orphan assets", which are attributable to shareholders before the merger with United Friendly takes place.

Perpetual, which holds 7 per cent of Refuge's shares, believes that the greater part of the surpluses which have accumulated in the insurers' funds since its formation in the mid-19th century belongs to shareholders.

The fund manager's view is based on arguments over the exact value of Refuge's pension fund and how much of its surplus shareholders are entitled to.

There is also a dispute over the proportion of funds in the ordinary and industrial branches of refuge's business, which are assets distributable between policyholders and shareholders.

Perpetual's view is that all funds accumulated before 1928, since when a 90/10 split in favour of policyholders has been in force, should go to shareholders.

The company also argues that part of the funds accumulated in a separate ordinary branch, which represents policies where premiums are still collected door to door, should go to shareholders.

Although this was blocked by the Department of Trade and Industry, Perpetual says that Refuge should have argued harder for it to happen.

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