Friends invites Resolution to merger talks

By Myles Neligan

LONDON (Reuters) - Life insurer Friends Provident unveiled an outline deal to join forces with financial sector buyout firm Resolution, triggering fresh talks between the pair just four days after Resolution's initial takeover plan went sour.

Resolution said Friday it would enter discussions over Friends' proposal, under which the insurer would buy Resolution, creating a new takeover vehicle devoted to consolidating the UK life insurance sector.

Friends' shares closed 0.7 percent lower at 71 pence, while Resolution's shares rose 4.2 percent to 91.5 pence.

Monday Friends had rejected an all-share takeover approach from Resolution as too low, and also expressed reservations about the buyout firm's corporate structure, which it described as "significantly different from recognized public company best practice."

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Resolution, founded last year by entrepreneur Clive Cowdery to buy life insurers and asset managers, is based in Guernsey for tax purposes, and contracts out its operations to a London-based partnership which includes its senior executive team.

A Friends spokesman said the group's merger plan would create a transparent UK-domiciled company which would be more in the interests of the insurer's 750,000 private shareholders.

"Friends have put out what I'd say are very sensible proposals, albeit unpalatable to Resolution's management," Shore Capital analyst Eamonn Flanagan said.