Flowers won't raise Friends bid, sets deadline

By Clara Ferreira-Marques

LONDON (Reuters) - Buyout group J.C. Flowers does not intend to raise its proposed 3.5 billion pound ($6.9 billion) cash offer for Friends Provident (FP.L) and warned it would walk away if the insurer does not begin talks by Friday.

Friends shares, already below Flowers' 150 pence-per-share proposal, tumbled as much as 12 percent on the news on Monday.

Flowers, whose initial proposal was rejected by Friends last month, has been frustrated at a lack of contact with the UK insurer's management and sources close to the matter had told Reuters on Friday that it was prepared to withdraw.

Monday's statement, however, is the strongest sign to date of growing tension between Friends and the U.S. group, which owns 2.7 percent of Britain's smallest blue-chip life insurer.

"J.C. Flowers wishes to confirm that it does not intend to increase the terms of its proposal above 150 pence per share," the buyout group said in the four-paragraph note.

"Furthermore, in the event that the board of Friends Provident does not enter into discussions with J.C. Flowers prior to the close of business on Friday 18 April, it is J.C. Flowers' intention to formally withdraw its proposal."

Friends, in the throes of a strategy overhaul since last year, rejected Flowers' 150p-per-share proposal in late March, saying the offer undervalued the insurer and its prospects and was not the basis for a discussion.

It reiterated its position on Monday, indicating an agreement between the two could prove tough to reach.