Resolution drops Friends Provident merger plans

Chairman Clive Cowdery said Standard’s 715p cash-and-share offer represented an “attractive balance” for Resolution’s shareholders.

Resolution’s largest shareholder, Pearl Assurance, was also in the hunt to buy the UK’s biggest manager of closed-life funds, but Resolution rejected a 691p offer from the privately-owned company last week.

Pearl immediately moved in with a higher rival offer for Resolution today, with a 720p approach valuing the business at £4.94bn (€7bn).

It has also increased its stake in Resolution from 16.5% to more than 22% – a major potential hurdle to Standard Life, whose offer needs approval from 75% of the company’s shareholders.

Pearl contrasted its all-cash offer with Standard’s mix of cash and shares, which it said exposed Resolution’s shareholders to uncertainty.

But Standard Life will become one of the UK’s leading life and pensions firms with around seven million customers if the deal goes ahead, boosting its funds under management to £191bn (€272bn).

Chief executive Sandy Crombie, who oversaw the stock market launch of Standard Life last year, said the takeover would “significantly expand” its UK operations.

The company plans to keep almost all of Resolution’s new business capacity, including its asset management operations and protection business for financial products such as mortgages.

It will also gain access to a potential two million new customers through more than 700 branches of mortgage bank Abbey, with which Resolution has a distribution agreement.

Collins Stewart insurance analyst Tim Young said: “Standard Life is principally interested in Resolution’s open protection business, bank distribution and asset management, and adding economically profitable customers to its administrative platform.”

Standard Life added that it expected to make a total of £71m (€101m) in annual savings through the deal by 2010.