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Resolution and Friends Provident agree takeover deal

The boards of Resolution and Friends Provident have announced this morning that they are recommending Resolution’s latest acquisition offer to shareholders.

The key terms of the acquisition include total consideration of £1.858bn, based on a Resolution share price of 88.25p as at close of trading last Friday and a Friends Provident share worth 0.9 of a new Resolution share.

Under the deal, each Friends Provident shareholder will get cash consideration for up to the first 2,500 shares held at 79.4p per share and total cash consideration of up to £500m at 79.4p per Friends Provident share.

The terms also include total consideration representing 69 per cent of adjusted EEV as at June 30, 2009 and a transfer to a primary listing on the official list of the UKLA at completion with inclusion in FTSE index expected to follow.

Chief executive Trevor Matthews and chief financial officer Evelyn Bourke will remain in their roles. Chairman Sir Adrian Montague will step down at completion of the deal.

The Resolution board says the terms of the acquisition deliver a substantial premium to Friends Provident shareholders, an attractive entry price for Resolution’s first consolidation and restructuring project and a good platform for creation of shareholder value.

The news comes as Friends Provident announces its underlying profit on an EEV basis fell 37 per cent to £131m in the first half of 2009 compared with £211m for the same period last year.

On an IFRS basis, underlying profit increased 92 per cent to £38m, up from £13m in H1 2008. Friends Provident maintained its interim dividend of 1.3p per share.

New business figures for life and pensions dropped a significant 37 per cent over the half to £319m on an APE basis compared with £507m in the first half of 2008, although the firm says sales improved in the second quarter.

Chief executive officer Trevor Matthews says: “We are excited by the prospects for our business as the foundation for Resolution’s consolidation and restructuring strategy for the open businesses in the life and asset Management sectors. Resolution is supportive of our current strategy and turnaround plan.

“Our achievements over the last 18 months in reshaping and refocusing our business have placed us well to participate in industry consolidation and leverage our efficient infrastructure.

“Trading conditions remain tough. In the UK, the economic slowdown has reduced new business from increments and new members on our existing group pensions schemes, while the protection market remains subdued compared to recent years.

“We are making headway in new schemes on nil or funded commission terms but there are significant timelags, exacerbated by the recession, from participating in tenders to winning the schemes and seeing new business volumes come through. As expected, these lower volumes have an exaggerated effect on new business metrics, but that will reverse when volumes recover.”

Shares in Friends reached an intra-day high of 78.60p following the announcement.

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Resolution and Friends Provident agree takeover deal
    Resolution are making for too much money. Maybe they should treat some of the policy holders of the their existing takeovers more generously first

  2. Stephen Phillips 11th August 2009 at 2:39 pm

    Shame about Friends Provident
    I don’t know about you, but I am sorry to see the end of Friends Provident. OK, that may seem a little extreme, but with the final offer from Resolution having been approved by the FP board, it seems likely that this grand old company has been consigned to the history books. No doubt it will continue to trade for a few more years, but I have been in the industry too long, and seen too many great names disappear, not to expect the same to happen again. If you question whether this is a bad thing, simply ask any policy holder with National Mutual, CU or a host of other companies that have disappeared inside other businesses (and therefore no longer under pressure to perform well in order to retain a competitive position in the market). Invariable, when a company loses its independence, customer returns nosedive and corporate profits soar. Unfortunately there is nothing we can do about it.

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