Standard Life considering bid for Resolution

Standard Life caused a stir amongst the UK life insurance industry recently by declaring its interest in acquiring Resolution - the largest specialist manager of in-force UK life funds - in a cash and shares offer deal that is believed to value the company as high as 4.5 billion, and immediately saw an 11 per cent surge in Resolution shares.

If the bid is serious and it is successful then rival insurer Friends Provident will have its nose seriously put out of joint as the takeover will scupper its plans of a nil-rate premium merger which would have created an insurance group worth 8.5 billion. That beneficial relationship for Friends Provident would use Resolution"s tactic of buying up closed life insurance portfolios to fund its own business growth, but that profitable relationship could be threatened, or ultimately derailed by Standard Life"s approach.

News of the bid came when Standard Life announced that they were monitoring the Friends Provident-Resolution merger and as a result were: "considering the possibility of a cash and shares offer for Resolution that may possibly include the disposal of certain assets."

Standard Life have been quick to caveat any bid, with a spokesman saying that "any offer would only be made if the board of Standard Life considered the bid to be in the best interests of Standard Life shareholders" and was keen to stress that a bid was not a foregone conclusion. But, whilst Resolution shares are on the up following the news, the share price of the Edinburgh-based Standard Life has suffered since details of the bid were revealed.

This bid also raises the question of whether Standard Life will make it in conjunction with Pearl, 16.5 % stakeholder in Resolution, or whether it will go it alone. The Pearl group has already stated that it feels it understands Resolution, but it is thought unlikely that it will mount a bid of its own. It is understood that Standard has held informal talks with Pearl discussing the possibility that it would purchase Resolution"s open life business if the bid is successful. It is believed that those talks involved Gerry Grimstone, Standard"s chairman and Clive Cowdery, chairman at Resolution as recently as last week, but neither company would comment on the speculation.

Market analysts will be watching this latest twist in the turbulent UK life insurance and life assurance industry with interest as, no doubt, will the City.

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