Friends set for bidding war after it rebuffs Resolution

Friends Provident yesterday rejected the bid from Clive Cowdery's Resolution in no uncertain terms. The 177-year old insurer labelled the £1.4bn all-share offer "wholly inadequate" and raised concerns over the structure of the investment vehicle, which is a partnership based offshore, which takes 10 per cent of any profits made.The insurer was unimpressed by the offer of 0.8 new Resolution shares for every Friends Provident share held and raised concerns over the company's dividend plans. Many of the company's 750,000 small investors depend on a regular dividend, while Resolution's private equity approach is not one usually based around regular payments.

In a statement it said: "Resolution received constructive feedback from Friends Provident and its advisers and is considering its response...The Resolution board recognises that Friends Provident has a broad shareholder base, including retail investors and investors who have a preference for receiving income."

Shares in Friends leapt 10 per cent on the news as investors expected other buyers to show their hands. Meanwhile others were optimistic that some of the larger shareholders in the insurer could be persuaded to come on board, given that they own shares in both Friends and Resolution.

WHAT THEY ARE SAYING:James Moore in the Independent: "Clive Cowdery was at pains to stress that "Doris in Dorking" is very much in his thoughts as he ponders his next move after his initial takeover approach to Friends Provident was rejected… What she will get from Mr Cowdery is part of a private equity-style deal-maker that might think about paying her something at some point but certainly won't forget to pay the boss and his mates. The Friends board has a duty to act for all shareholders and has paid due regard to Doris in rejecting the first approach. It would seem that Mr Cowdery has a lot of work to do if it is to back a second."

Geoff Foster in the Daily Mail: "A cash offer, rather than just shares, may be what it takes to clinch the deal, plus a commitment to paying dividends in future to win over investors." ·