Private equity among bidders for Friends unit

By Simon Challis

LONDON (Reuters) - A number of private equity (PE) companies are among the bidders for Lombard, the high-end insurance arm of Friends Provident, but initial offers are lower than had been expected, a source familiar with the matter said on Friday.

The second round of bidding, which is likely to start next week, will be dominated by buyout firms, the source said.

"It's mainly PE firms that are through. This is about the size that they can do so there is a fair amount of interest from them," the source said.

Friends Provident, the smallest blue-chip life insurer, said in January it was looking to sell Lombard -- a Luxembourg-based specialist in wealth management products for high net-worth individuals -- just three years after buying the firm to expand its international profile.

Rival insurers have largely steered clear of bidding for Lombard, but Swiss Life is also through to the next round, the source said. Swiss Life declined to comment.

Offers range between 550 million euros (437.9 million pounds) and 650 million, sources familiar with the situation said, far less than the 700 million pounds price tag industry analysts had put on the unit.

Friends bought Lombard in 2005 for around 400 million pounds, including earnout clauses.

Friends Provident declined to comment. It has been in the throes of a strategic overhaul after questions over its future were raised when it dumped key growth targets last year and a planned 8.7 billion pound ($17.22 billion) merger with rival Resolution fell through, costing the chief executive his job.