Sun Life directors hold out for 520p a share from AXA

Independent directors of Sun Life & Provincial Holdings are holding out for about 520p a share in return for recommending a deal that would allow AXA, the insurance giant, to buy out the 43.7 per cent of the company it does not already own.

The directors, led by chairman Lord Douro, are confident that their tough negotiating tactics will result in a deal early next week on far more favourable terms to minority shareholders than had been hoped for when the talks began in late March.

The directors have warned AXA, which has so far been reluctant to pay anywhere near the sums UK institutions have been seeking, that unless it comes back with an improved offer Prudential, SL&P's biggest independent shareholder, could veto a deal, whether or not it is recommended by the board.

The Pru, which has 5.99 per cent of SL&P, is understood to have initially asked for £6 a share, and as of yesterday was believed still to be hoping for £5.70.

The French insurance giant, which approached SL&P's independent directors last month when SL&P's shares were below 360p, had hoped to get away with an offer of about 420p a share, but this was rejected by the board. AXA has now agreed to come back with an improved offer before the end of the week.

In an attempt to ginger up SL&P's share price and bolster their negotiating hand, SL&P's directors put out a statement yesterday, confirming that negotiations were still going on. The statement appears to have had the opposite effect: SL&P shares fell 5p to 436.5p.

City observers have argued that AXA initiated the buy-out discussions last month because it saw an opportunity to buy in the minorities on the cheap. However, there have been strong suspicions that AXA's enthusiasm had cooled as soon as news of the discussions leaked and the board of SL&P started putting pressure on AXA to improve the terms.

The statement said: "It has not so far been possible to reach agreement on the terms of any such offer. AXA has now indicated to the independent non-executive directors that a new proposal will be put to them by the end of the week. When the independent directors have had an opportunity to consider this proposal a further announcement will be made."

SL&P shares have languished since the £3.5bn takeover of Guardian Royal Exchange last year, much to the irritation of UK holders, who agreed to take SL&P paper in return for GRE.