Resolution's successful bid for Friends leaves share prices static
Friends Provident’s share price remained flat in the week after Resolution made its fourth bid for the life insurer since the beginning of July. The £1.86bn takeover offer has now been backed by Friends. The terms are 0.9 Resolution shares for each Friends Provident share.
Resolution is a Guernsey-domiciled investment firm, set up by insurance tycoon Clive Cowdery to acquire under-performing financial services firms.
The agreement may represent the beginning of market change and spark a further flurry of consolidation in the life sector, according to Moody’s. “The market still contains a relatively high number of players, some of which appear sub-scale and which should, given market dynamics, be likely candidates for consolidation or exit,” a Moody’s credit outlook report said.
Further, M&A activity could also spread over to the banks, particularly those who have received state aid. They will be looking to ditch insurance subsidiaries or any other non-core assets, Moody’s said.
The announcement came as Friends Provident unveiled its half-year results ending 30 June 2009. On a European embedded value basis (an alternative accounting measure for life companies, which reflects expected future cash flows), the company reported a profit of £131m, but this was down from the £211m it reported in 2008.
Elsewhere, RSA’s share price saw the biggest slump on our LSE watchlist, dropping 6.40% to 120p per share. Hardy experienced the second biggest slump of 4.17% to 270p per share.