| Bid Approach From Resolution

12th Jul '09 by MrT

3 comments 1592 reads

Insurance tycoon Clive Cowdery has apparently written to Friends Provident Chairman Adrian Montague in the last few days, setting out the terms of an all-share deal in which the Friends Provident management team will remain in place, according to the Sunday Times and Telegraph.

The offer could give Friends Provident shareholders a portion of a Resolution share for every Friends Provident share they own. It would value Friends Provident at just above GBP1.41 billion, pretty much bang in line with its current market cap at 60p a share.

The insurer is likely to turn down the idea of a takeover both on the grounds of price and because of concerns about corporate governance at Resolution.

Both parties are expected to make Stock Exchange announcements tomorrow.

Resolution is an investment firm set up to buy up under-performing financial services firms. The move by Resolution signals the start of its aggressive effort to buy three to four life insurers over the next 18 months.

Other targets apparently may include Old Mutual PLC, Legal & General Investment Management, which is a unit of Legal & General Group PLC (LGEN.LN), and Scottish Widows and Clerical Medical, which are owned by Lloyds.

Looks like it may be an amusing battle - watch this space!

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/insurance/5805815/Friends-Provident-set-to-reject-Resolution-bid.html

http://online.wsj.com/article/BT-CO-20090712-702640.html

http://www.bloomberg.com/apps/news?pid=20601085&sid=a9V2u8KvTC2o

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MrT

13th Jul '09

Friends Provident rejects acquisition proposal from Resolution: http://www.stockopedia.com/news/announcement/FP./090713fp.001118.htm

The Board is open-minded about the benefits of industry consolidation, but does not believe that Resolution's proposal is in the best interests of Friends Provident shareholders. The Board sent a letter to the board of Resolution setting out the reasons for their rejecting the offer.

The proposed terms of an all share offer of 0.8 new Resolution shares for every Friends Provident share are wholly inadequate to compensate Friends Provident shareholders for the suggested exchange of their shares into Resolution shares which would represent a very different type of investment for Friends Provident's shareholders than that which they hold today and one subject to very different risks;
The proposed terms offer Friends Provident shareholders little or no premium or uplift in value without a significant re-rating of the combined group, the substantial majority of which would be represented by Friends Provident's existing businesses;
Resolution's proposal would result in Friends Provident shareholders holding approximately 74% of the enlarged Resolution, broadly in line with Friends Provident's current market capitalisation relative to Resolution's;
The lack of commitment to Friends Provident's dividend policy represents a significant uncertainty for Friends Provident's shareholders;"

AND THE BIGGEST OUCH OF ALL...

"The governance structure of the Resolution Group as it is currently constituted would offer Friends Provident shareholders less transparency and a structure significantly different from recognised public company best practice".

Nice the way they slipped that in!!

The structure of Resolution would also dilute Friends Provident shareholders' ongoing interest in Resolution through the various preferential interests accruing to Resolution's operating partners; and
The complexity of the proposed board and management structure would materially limit the remit of Friends Provident's highly regarded management team both strategically and operationally.

They really don't seem very keen, do they?

And the riposte from Resolution - pretty neutral. Seems to be regrouping and figuring out next steps.

http://www.stockopedia.com/news/announcement/FP./090713fp.000354.htm

The Board of Resolution confirms that it is considering a possible offer for the entire issued (and to be issued) share capital of Friends Provident in connection with this consolidation strategy and has approached the Friends Provident Board in this regard. Although Resolution's proposal was not considered to be acceptable by the Board of Friends Provident, Resolution received constructive feedback from Friends Provident and its advisers and is considering its response. No decision has been made by Resolution to make an offer for Friends Provident. Any offer that is made by Resolution is likely to be primarily a share exchange offer, but with a partial cash element made available to all Friends Provident shareholders from Resolution's existing cash resources. The Resolution Board recognises that Friends Provident has a broad shareholder base, including retail investors and investors who have a preference for receiving income, and intends to take this into account in formulating any offer and its post-acquisition dividend policy. Resolution reserves the right to amend any or all elements of its possible offer, including, but not limited to, the amount and mix of consideration between shares and cash.

17th Jul '09

Counter proposal from Friends Provident: http://www.stockopedia.com/news/announcement/FP./090717fp.003678.htm. Basically, they are prepared to enter talks with Resolution, but only if the merged business retained its name, remained listed on the London Stock Exchange and paid tax in the UK...

What will Clive make of that?!

Bid approach from Resolution

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MrT

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