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Door left ajar as Friends fends off new bid

Friends Provident rejected a second approach from Resolution on Monday, claiming the proposals were “flawed in a number of significant ways”.

Earlier on Monday, Resolution tabled a new cash and shares offer for the company but Friends says that the structure and governance arrangements would be “totally inappropriate in a public company context”.

The concerns include the proposed outsourcing of substantial management functions to Resolution Operations, the secondary company run by a management team including Clive Cowdery and chief executive John Tiner.

Friends points out that the main board of Resolution has no representatives from the members of the management team of Resolution Operations, reducing shareholder accountability, and highlighted the “significant” fees and entitlements of the management team of Resolution Operations.

As part of Resolution’s second proposal, Friends Provident Holding would be the vehicle used to acquire other insurers, with Resolution intending to re-list as an enlarged group by 2012 on completion of the group’s consolidation strategy.

The board of Friends Provident says the structural and governance concerns are so fundamental that no further talks can continue with Resolution until they are addressed.

Friends has left the door open for a deal, stating that it can only be done if the terms are fair to both sets of shareholders, meet corporate governance standard best practice and is appropriate for a continued acquisition strategy.

Lowland Financial managing director Graeme Mitchell says: “There are still lots of barriers and personalities in the way of the deal but we do need to see consolidation in the UK life industry.”

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