Resolution rejected as HHG accepts Sun's bid for life funds

HHG FINALLY closed the door on Resolution Life, the financial services group bidding for its pounds 26bn closed life book, accepting a revised pounds 1.07bn offer yesterday from Hugh Osmond, the leisure entrepreneur, and agreeing to move into exclusive negotiations with his company, Sun Capital.

Mr Osmond seemingly secured the HHG funds - which include the Pearl, NPI and London Life books - two months ago, when the HHG board accepted a pounds 1.025bn offer. However, Resolution came back to the table last week, offering some pounds 90m more than Mr Osmond's recommended bid, in an attempt to steal the deal from under Sun Capital's nose.

While Mr Osmond's revised offer remains pounds 45m short of Resolution's proposal, HHG agreed to put a pounds 45m break fee in place, which would be payable to Sun if HHG reopens talks with a third party. Resolution has yet to carry out its due diligence on the HHG book, and would be likely to take longer than Sun to close any deal. Sun Capital has teamed with TDR Capital for the deal, creating a new vehicle, Life Company Investor Group (LCIG), to conduct the transaction.

Roger Yates, HHG's chief executive, said: "The HHG board had a straightforward choice - delivering shareholder value by accepting the certainty of the existing agreement with improved terms or taking a gamble on [Resolution's] proposal and risk LCIG walking away from the deal. The board's decision delivers certainty and improved value for shareholders at no further risk. We believe the LCIG deal delivers the right combination of value and risk reduction with certainty of outcome, transfer of significant pension liabilities, revenue protection for Henderson and a good cash price relative to embedded value."

Resolution would not accept defeat yesterday, saying it intended to continue considering "its position on the HHG life services business". It added that it would look at other acquisition opportunities in the sector. It has just 10 days before HHG's extraordinary meeting, where shareholders will be asked to approve Mr Osmond's deal.

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