As a part of the deal, Resolution will offer investors 0.9 shares for each Friends Provident share. The deal also includes cash option amounting to £500 million for those who do not want to retain shares.
"We are delighted to have reached agreement with the board of Friends Provident. We are excited by the potential for our proposed restructuring of the U.K. life assurance and asset management sector and believe the acquisition of Friends Provident is an excellent first step," said Resolution Chairman Mike Biggs.
The investment firm founded by insurance tycoon Clive Cowdery had proclaimed its plans in December last year to acquire three or four insurance firms, merge them and sell them as enlarged profitable units. Friends Provident was one of the insurance firms Resolution was considering.
Addressing the media persons, Cowdery stated, “Releasing the capital inside of the life insurance sector today and returning it to investors.”
He added, “The sector has failed to meet either the requirements to generate steady, stable and predictable income,” for investors.
Trading adversely affected
Trevor Matthews, Chief executive officer of Friends said that as a result of recessionary trends, trading has been hard hit.
The insurer has reported a net loss of £98 million for the first half of the fiscal year.
“In the UK, the economic slowdown has reduced new business from increments and new members on our existing group pensions schemes, while the protection market remains subdued compared to recent years,” he stated.
“Enthusiastic” about the agreement, Matthews said, "We look forward to playing a leading role in industry consolidation and re-shaping the new business landscape."
As a result of the deal, shares of Friends Provident rose in London, gaining 2.4% to 77 pence. Panmure Gordon has also raised its rating for Friends Provident shares from ‘hold’ to ‘buy’.
John Tiner, chief executive officer, Resolution said that the deal is expected to be completed by October.
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