JC Flowers says mulling Friends Provident bid

By Simon Challis

LONDON (Reuters) - U.S. private equity firm JC Flowers said on Monday it was considering making an offer for Friends Provident FP.L, boosting the shares of the stricken insurer.

JC Flowers, which also said an entity that it advises had acquired a stake of around 2.7 percent in Friends, stated that it intended to approach Friends' board "with a view to developing a proposal that will deliver value for Friends Provident's shareholders".

Friends' shares jumped 5.6 percent on the news, its biggest one-day rise since July 2007, to stand at 161 pence by 2 p.m., making it the biggest blue-chip gainer across Europe.

JC Flowers approached the Friends Provident board before Christmas calling for talks on an informal bid worth around 175 pence per share, a source familiar with the situation said.

But Friends declined to enter discussions at that time, partly because of concerns that Flowers could not deliver a workable bid, and in particular would struggle to raise enough money in the debt markets during the credit crunch to fund the around 4 billion pound bid, the source said.

MF Global analyst Peter Eliot said JC Flowers' renewed approach was no surprise. "They were interested before, when the share price was 50 pence higher than it is today, so it stands to reason they should show interest again."

CHEAP AT THE PRICE

Pali International analyst Marcus Barnard said any bid pitched at 175 pence per share would be "a steal". That price would only be a little above Friends' current embedded value, while Pearl Group's recent bid for insurer Resolution (RSL.L) was at about 1.2 times embedded value.