Friends revives takeover talks

Friends Provident has started talking to potential buyer Resolution again after receiving an improved offer of £1.86m. The insurer indicated the revised offer was high enough to justify re-opening talks "with a view to recommending its proposal." However it also warned that: "While discussions are ongoing, there can be no certainty that any offer will result nor as to the terms on which any offer might be made."

Resolution - an investment vehicle run by insurance specialist Clive Cowdery - is now offering Friends investors 0.9 Resolution shares for each share they own, with a cash option for its army of smaller shareholders. The offer is an improvement on the 0.82 ratio initially proposed and which has now been raised several times.

In addition to the level of the offer, Friends executives were also initially concerned about Resolution's corporate governance. The company is based offshore and Cowdery and his management team stand to make large bonuses as a result of any takeover.

However it is understood that some of Friends' bigger shareholders have brought pressure to bear on the board to overlook their worries. Consolidation is expected in the industry and any players left on the sidelines will find themselves at a disadvantage.

With Friends to release its interim results tomorrow, it will be working hard to agree a deal in time for the announcement.

WHAT THEY ARE SAYING:Eamonn Flanagan at Shore Capital, on Bloomberg.com: "It would appear that Friends Provident’s existence as an independent entity is over. The question is who next for the Resolution juggernaut?"

Simon English in the Evening Standard: "The deal … will be a significant coup for Cowdery as he seeks, for the second time, to kick-start consolidation of the bloated life insurance industry." ·