Friends rejects Resolution's offer

By Lorraine Turner and Paul Sandle

LONDON (Reuters) - Insurer Friends Provident FP.L rejected a revised offer from Resolution (RSL.L) because the financial buyout firm's structure and governance were "totally inappropriate" for a public company.

Earlier on Monday, Resolution had sweetened its proposed offer for the insurer by including a cash element and a commitment on the dividend and clarification on the structure.

Friends, however, said talks could not progress until issues such as the outsourcing of management functions to a third-party company and a lack of representation of the management team on the main board of Resolution were addressed.

It also said fees and preferential entitlements would solely benefit the management company Resolution Operations LLP rather than Friends Provident's shareholders.

"Friends Provident continues to see advantages in the consolidation of the UK Life industry, but also believes that a consolidation of Friends Provident and Resolution can only be agreed on terms that are fair to both sets of shareholders and with a structure that complies with corporate governance best practice," it said in a statement.

Resolution said it was disappointed the Friends Provident board was not more focussed on the best interest of shareholders. "Resolution continues to consider its position," a spokesperson said.

The Guernsey-based vehicle of entrepreneur Clive Cowdery earlier said it had sought to address the concerns of Friends Provident retail shareholders by improving its initial bid and offering cash for the first 2,500 shares.

"This should allow the vast majority of retail shareholders to exit in cash if they choose to do so," Chief Executive John Tiner said on a call with journalists.