14 July 2009
Friends Provident is to reject the bid made earlier this week by
Resolution. Friends Provident dismissed the all share offer as
"wholly inadequate". Based on current share prices, the offer would
be worth about £1.64bn compared with Friends Provident's £1.59bn
market capitalisation. City analysts stated that the offer was "too
cheap".
Resolution suggested that Friends Provident could be open to a
takeover yesterday after revealing it had received "constructive
feedback" from the insurer.
The company also questioned how Cowdery, who made his name
merging closed insurers, known as zombie funds, would run an active
life company which is part way through a turnaround strategy.
Eamonn Flanagan at Shore Capital said Friends already ran a "very
lean" operation. Several analysts said they were surprised at the
offer and highlighted the private equity style 10% payout to
Resolution's team of seven partners.
Advisers were not surprised by Resolution's bid for Friends
Provident and some said the UK insurer has lost its way as a
business. Others lamented that such a long running brand, which was
founded in 1832 by Quakers, is to lose its independence.
Trevor Matthews, Friends Provident's chief executive, said
Friends was "a great company which is going through trauma".
Friends earlier announced a 40% fall in sales in the first quarter
of 2009. In an interview with the Daily Telegraph, Trevor Matthews
said: "I think Friends Provident has a strong future as an
independent company and I'm stronger in my conviction about that
today than when I joined. But it's a public company and any company
like this will get approaches from time to time."
Shares in Friends Provident jumped by more than 10% to 66.6p, as
speculation mounted that Resolution would increase its original
offer.
