Resolution bid battle intensifies

Standard Life said it would be able to offer new products to customers

The bidding war for insurer Resolution has intensified after it agreed to back a £4.9bn offer from Standard Life while rival Pearl Group raised its own bid.

Resolution's directors agreed to recommend Standard Life's 715 pence per share bid, spurning an existing 691p offer from Friends Provident.

But Pearl Group has made an improved offer worth 720 pence a share and is seeking talks with Resolution's board.

Resolution is the market leader in closed life insurance funds.

Three-way battle

The three-way bid battle for Resolution began three months ago but has looked like reaching a conclusion in recent days.

Resolution agreed to back Friends Provident's offer in July, but recently entered into discussions with Edinburgh-based Standard Life.

If approved by its shareholders, the Standard Life deal would be its largest since it floated its shares in 2006.

As part of the proposed deal, Standard Life has agreed to sell £2.3bn worth of Resolution assets to fellow insurer Swiss Re.

The offer will significantly expand our UK operations and complete our offering Sandy Crombie, Standard Life chief executive See Resolution shares See Standard Life shares See Friends Provident shares

Resolution would be obliged to pay Friends Provident £49m for breaking off its agreed merger, but said Standard Life had agreed to bear the costs of this.

The deal would create one of the largest pension and life assurance firms in the UK, with more than seven million customers.

Standard Life chief executive Sandy Crombie said the deal would "significantly expand our UK operations and complete our offering to ensure we can meet the investment, savings, protection and pension needs of our significantly expanded customer base".

'Bid uncertainty'

But Pearl Group, which has built up a 22% shareholding in Resolution, said its improved 720p a share offer - upped from 691p - would be a "great outcome" for its investors.

It added that it was far from certain that the Standard Life offer would be approved by its own shareholders and by Resolution investors, including itself.

Resolution has yet to react to Pearl Group's increased offer and urged its shareholders to "take no action" while it considered the new bid.

Prospects of a deal with Friends Provident are over

Resolution's shares closed up 2.4% to 726.5 pence after the terms of the rival bids were announced, while shares in Standard Life rose 0.8% to 278.5p.

But Friends Provident shares fell 0.4% to 174.9p.

Analysts say Resolution is attractive because of its cash-rich balance sheet, mortgage-related life protection business through subsidiary Scottish Provident and retail distribution agreement with High Street bank Abbey.

Standard Life floated its shares last year, after more than 80 years of being owned by its members.