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Resolution opens up as it closes in on Friends

Resolution is closing in on the acquisition of Friends Provident in a move that would see it shift significantly away from its closed life fund consolidator model.

Friends confirmed on Monday that it in advanced talks over a possible takeover by Resolution, sparking rumours that a rival could open an 11th-hour bidding war.

The all-paper deal would see Resolution take 50.1 per cent of the combined company and Friends’ 49.1 per cent, creating an £8.3bn life company which would be bigger than Standard Life.

But reaction has been mixed and analysts say Axa, Aegon or a private equity firm could yet make an offer.

Collins Stewart analyst Tim Young, who notes that Axa owns 16 per cent of Friends, says: “Axa has argued that this is not “a strategic investor” but we doubt that this is really the case.”

One unnamed analyst believes the deal is complementary, in that Resolution, which has strong cashflow from its closed life businesses, could bankroll Friends’ cash-intensive new business generation, but he has some concerns about Resolution shifting focus.

The analyst says: “I understand why Friends would like to merge but I understand less why Resolution would. Resolution does closed funds so this would see them change their stance to new business but pricing is getting more aggressive in closed funds so I guess it makes sense.”

Young points out that Resolution said earlier this year that it is was looking at merger opportunities while Friends Provident has long been considered a takeover target in the life business.


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