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U.K. insurance takeover: Resolution surrenders to Pearl

19 November 2007

LONDON: Resolution, the biggest British manager of closed life insurance funds, agreed to a 4.98 billion takeover by Pearl Group, ending a bidding contest and almost four months of resistance.

'Resolution is delighted to recommend this transaction, which creates a major U.K. insurer and an expert manager of closed funds,' Clive Cowdery, the company chairman, said in a statement to Regulatory News Service on Friday. 'We wish Pearl continued success.'

Resolution stockholders get 720 pence in cash for each share under the terms of the agreement. That amounts to 1.2 times Resolution's embedded value and 17 percent more than Resolution's price on July 25, the day before Pearl announced its interest in an acquisition. The value of the deal is $10.2 billion.

The combined company would manage 85 billion, making it on of the top 10 insurers in Britain, the companies said.

The support clears the way for the biggest British insurance takeover in seven years. Resolution, based in London, initially fought Pearl after agreeing in July to buy Friends Provident, another British insurer. Instead, Resolution backed a takeover last month by Standard Life, which nevertheless withdrew its cash and stock offer earlier this week amid an 11 percent decline in its shares from a month ago.

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Pearl, which is closely held and headed by Hugh Osmond, the founder of Punch Taverns, built a stake of more nearly 26 percent in Resolution to block Standard Life. Pearl's cash bid, supported by Royal London Mutual Society, would cement Pearl's position as the largest consolidator of closed life insurance funds.

'We wish to combine the proven strength and expertise of both teams to create one organization capable of delivering far more than either of its constituent parts,' Osmond said in a statement.

Royal London agreed to buy those Resolution insurance funds that are open to new customers, including the protection business, for 1.27 billion. It also will provide Pearl with about 300 million of financing.

Resolution is the best-performing British insurance stock this year, up 9.8 percent, compared with a 12 percent decline for the eight-member FTSE 350 Life Insurance index. Resolution closed unchanged at 704.5 pence in London on Friday, valuing the company at 4.84 billion.

Pearl's takeover would be the biggest for a British insurer since CGU bought Norwich Union for 7.4 billion to create Aviva, the largest British insurer.

Source :

http://www.stockhouse.com