Who will win the tug of war for Resolution Life? It’s a hotly
debated question as Edinburgh-based Standard Life and Pearl Group,
a UK closed life insurance fund manager, play a fast-changing game
of offer and counter-offer for Resolution.
Pearl set the game in motion on 10 October when it launched a
tentative £6.60 ($13.88) per share cash offer for Resolution worth
£4.52 billion. Nine days later Pearl, which has built its stake in
Resolution to 24 percent, upped its offer to £4.73 billion (£6.91
per share). Then on 25 October Standard Life joined the fray,
launching a counter-offer for Resolution comprising £5.17 in cash
and 0.715 Standard Life shares for each Resolution share held. When
made, the offer was worth £4.9 billion. Not to be outdone, Pearl
came back on 26 October with an offer (£7.20 per share) equalling
Standard Life’s £4.9 billion.
Break-up of Resolution
Acceptance of either offer will result in Resolution’s break-up and
put an end to the pending merger of Resolution and UK insurer
Friends Provident. With Pearl’s offer, its consortium partner,
mutual insurer Royal London, would pay £1.25 billion for certain
Resolution assets. With Standard Life’s offer, its consortium
partner, reinsurer Swiss Re, would acquire Resolution’s closed life
insurance funds business, which manages assets of about £60
billion. Standard Life would retain Scottish Provident –
Resolution’s new business unit – and Resolution Asset Management,
which has about £50 billion of assets under management. Standard
Life would also achieve an estimated £71 million in annual pre-tax
cost and financial synergies by the end of 2010.
Weighing up the offers, Resolution’s board noted that Pearl’s offer
provided shareholders with certainty. However, Standard Life’s
offer would leave Resolution shareholders with about 18 percent of
the enlarged group and possible upside from any re-rating of
Standard Life’s shares.
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“Resolution is engaging with each consortium to bring forward
offers that maximise the value delivered to Resolution
shareholders,” said Resolution chairman Clive Cowdery.