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The BBC's Andrew Verity
"This is what policy holders have been waiting for"
 real 56k

The Halifax's John Lee
explains how policy holders will benefit
 real 56k

Stuart Bayliss of the Equitable Life Action Group
"What we have got is an agreement amongst all parties that something needs to be done"
 real 28k

Monday, 5 February, 2001, 20:49 GMT
Halifax seals Equitable Life deal
halifax and equitable life symbols
Halifax has agreed a 1bn deal for the assets up for grabs in pension group Equitable Life's distress sale.

Equitable's seven-month search for a buyer looked to set to end on Monday in a deal that will create a bank and life insurance giant Halifax Equitable.

However, even as Halifax scented victory, US financial services company GE Capital was considering late on Monday night whether to challenge the sale with a new counter-bid.

GE Capital has not yet raised the price on offer, but it is looking to rejig the structure of its bid for Equitable, according to Reuters news agency.

It would also consider "substantially" improving the price in a last-ditch bid to win Equitable over, reports the news agency.

The Halifax deal

Halifax's proposal will help the rump of Equitable bridge a 1.5bn funding gap, which emerged last year after the firm was forced in a landmark House of Lords ruling to honour payout commitments to some policyholders.

But small print in the contract warns that the full 1bn will be paid out only if holders of disputed policies back the deal, and the Halifax Equitable meets profit targets in 2003 and 2004.

Reducing risk

Halifax is seen by some to be taking a brave step in buying the Equitable - a move that other potential bidders such as the Prudential shunned.

But the conditions of the deal go a long way to reducing the risk associated with buying the society.

Just 500m will be paid upfront by Halifax to secure the sales force and the administrative part of the business.

Equitable Life is reported to have a highly efficient administration and respected sales force, making the deal attractive for the Halifax.

The remaining 500m is subject to reaching a compromise with policyholders and meeting future sales and profits targets.

First reactions

Chris Headdon, Equitable's chief executive, said there was a "strong incentive" for holders of the disputed policies, the so-called guaranteed annuity rate plans, to support the takeover.

"This is a good result for policyholders after a long period of uncertainty," he said.

Howard Davies, Chairman of the FSA
FSA Chairman says the deal is in the interests of policyholders
The deal was also backed by City watchdog the Financial Services Authority, which has been closely monitoring the Equitable's progress in meeting its obligations to policyholders.

"The transaction offers the prospect of a significant strengthening of the (disputed) fund, improving its investment freedom and the likely future returns for policyholders generally," said FSA chairman Howard Davies.

"More work remains to be done but, in the FSA's view, there is now a promising basis for a fair deal for policyholders."

But the policyholders have not yet agreed to the deal and will not vote until autumn this year.

The GAR policyholders must agree to relinquish some of the future benefits of their schemes in return for a one-off payment to top up their policies.

Ambitious Halifax

Halifax, Britain's largest mortgage bank, believes it will achieve returns of 15% from the purchase within three years.

The Halifax said: "Halifax has structured a transaction which is rewarding for our shareholders and fair to The Equitable's policyholders."

GE Capital originally looked like the favourite to buy Equitable after it appeared to top Halifax's bid by offering 1.2bn.

But although GE Capital was eager to buy the sales force, it only wanted to offer a loan for the with-profits business.

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See also:

04 Feb 01 | Business
Rival offer for Equitable
31 Jan 01 | Business
Halifax hope for Equitable
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