Friends rebuffs Resolution proposal

By Quentin Webb and Lorraine Turner

LONDON (Reuters) - Friends Provident rejected a takeover proposal from Clive Cowdery's Resolution, saying the entrepreneur's terms were inadequate, his company was opaque and a tie-up would hobble the life insurer's management.

However a sharp rise in Friends Provident Group Plc shares on Monday pointed to investor expectations of a sweetened offer and some analysts hailed what could be the first step in a long-awaited consolidation of the sector.

Friends Provident said Cowdery's Resolution, based on the island of Guernsey, had proposed an all-stock deal consisting of 0.8 new Resolution shares for every Friends share.

That would value Friends at about 1.69 billion pounds, based on Resolution's Friday closing price of 90-1/4p.

But the target said this was wholly inadequate to compensate its 750,000 shareholders for a "very different type of investment" which would be created if the two groups combined.

It said the proposed set-up's complexity would hinder Friends Provident management strategically and operationally and would offer shareholders less transparency.

"We are open-minded about the benefits of industry consolidation, but at this stage, the pace, direction and value of your consolidation strategy is speculative and uncertain," Friends Chairman Adrian Montague wrote in a letter to Resolution published on Monday.

The proposed deal would leave Friends shareholders with about 74 percent of the combined group.