Friends rejects takeover a second time

After throwing out the first offer from Clive Cowdery’s investment vehicle Resolution last week, the Friends Provident board has now rejected its second approach. Although the offer contained an improved amount of cash, which would have allowed many smaller shareholders to receive an all-cash payment in return for their shares, Friends said it was not enough. In a statement it labelled the offer as in large part “totally inappropriate.”

The insurer said “[Friends Provident] believes that a consolidation of Friends Provident and Resolution can only be agreed on terms that are fair to both sets of shareholders and with a structure that complies with corporate best governance practice."

While Resolution was considering its position in the wake of the news, shareholders of both groups were said to be keen to see talks continue. Many Friends shareholders also own stakes in Resolution and will be eager to see a return on their investments.

Among the elements which still need to be improved are the corporate governance arrangements, with Resolution based offshore in Guernsey and set up as a private equity-style entity. However there is optimism the two groups can return to the negotiating table and the Friends Provident statement notably talked of industry consolidation in positive terms.

WHAT THEY ARE SAYING:Lex in the Financial Times: "The frequent exchanges between Resolution and Friends Provident suggest the two UK insurance companies are edging closer. Both are convinced life assurance industry consolidation must happen. They differ only about how to achieve it."

David Wighton in the Times: "By selling, Friends shareholders would be placing a great deal of faith in Mr Cowdery's strategic and commercial nous. As it stands, the deal is a very expensive rights issue, paving the way for further acquisitions that Friends could do itself, without paying Mr Cowdery's fat fees. Many similar efforts have failed in the past."

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