resolution in tug of war for control of Resolution Life
The battle for control of UK insurer Resolution Life ended in
victory for closed life fund specialist Pearl Group on 16 November,
when rival Standard Life withdrew its offer and Resolution’s
directors gave Pearl’s cash offer their full backing. The offer,
which values Resolution at £4.98 billion ($10.3 billion), will
create a combined group with assets under management of £85
billion, making it a top-ten UK life insurer.
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The tug of war between Pearl and Standard Life was sparked on 10
October when Pearl launched a tentative cash offer for Resolution
worth £4.52 billion, which it upped to £4.73 billion nine days
later. Standard Life joined the battle on 25 October, launching a
combination cash and share offer, then worth £4.9 billion, for
Resolution. Standard Life’s offer received backing from
Resolution’s board, which it later withdrew. On 11 October Pearl
countered with a cash offer equalling Standard Life’s.
Pearl’s initial move to gain control of Resolution came in the wake
of an announcement in July that Resolution and life insurer Friends
Provident planned to merge. This was a move that Pearl, which had
been building up an interest in Resolution since early 2007,
strongly opposed. “Pearl does not believe that the merger proposal
will maximise value for Resolution’s shareholders,” the insurer
stated in July.
With Pearl victorious, the Friends Provident merger has been laid
to rest and Pearl and its consortium partner, mutual life insurer
Royal London, will share the spoils, assuming Resolution
shareholders approve the offer. Pearl’s target is clearly
Resolution’s £57 billion closed life fund assets, which it will add
to its own closed life fund assets of almost £28 billion.
Royal London, which has pledged about £300 million in debt funding
to Pearl, will acquire certain Resolution assets for £1.27 billion.
These include Resolution’s new business units, Scottish Provident
and Scottish Provident International, and blocks of linked and
protection in-force business.
Repercussions for Friends Provident
For Friends Provident, failure of what would have been a merger
valued at about £8.6 billion has had some unpleasant repercussions,
including the departure of CEO Phillip Moore after less than a year
in the position.
Until a new CEO is appointed, Friends Provident will be headed by
chairman Adrian Montague, who has taken on the role of
executive chairman. Announcing Moore’s departure, Montague said in
a statement that it had been “a challenging year for the group and
its management team”.
He continued that while management remains confident of the group’s
prospects, ”it is right that we should take a hard look at the
group’s strategy to ensure that we are delivering the highest value
available to our shareholders. The board has concluded that this
requires a change in the management team.”
Conclusions drawn from a “detailed review of the group’s strategic
options” would be announced at the end of January 2008, said
Montague.
The announcement has not gone down well with rating agency Moody’s
Investor Services, which has placed Friends Provident under review
for a possible downgrade of its rating. Moody’s said its decision
followed the announcement that Moore had resigned and that the
group was working on a detailed review of its strategic options,
and reflected “the current lack of visibility with regard to
Friends Provident’s strategic objectives and future
prospects”.
