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Standard Life trails in Resolution race

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Published Date: 28 October 2007
By TERRY MURDEN
STANDARD Life is coming under pressure to lift its offer for Resolution Life or lose out to a higher bid from Pearl Group.
Analysts believe Hugh Osmond, the Pearl Group boss, is in pole position after lifting his bid to 720p a share in cash, against a cash and shares offer from Standard Life worth 716p at Friday's closing prices. The bid from Pearl, valuing Resolution at
£4.94bn, is favoured by those who prefer cash to paper in the current market, but the value of the Standard Life bid may have greater growth potential, offering greater value to shareholders.

Significantly, Resolution did not reject Pearl's latest offer outright as it did with previous approaches and Resolution chairman Clive Cowdery spoke to Osmond by phone on Friday night.

The battle is described as too close to call by analysts, but Osmond also raised Pearl's holding in Resolution to 24.2%, close to making it a blocking stake. However, Standard Life chairman Gerry Grimstone said his board had a number of options available, suggesting it may raise its offer.

One analyst said Pearl's revised bid was "incredibly stretched", though Barry Cornes at Panmure Gordon said in a newly published note that Pearl had the upper hand. "Although we believe that both sides can and probably will increase their offers over the next 60 days, we believe that Pearl will be ultimately victorious," he said.



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  • Last Updated: 27 October 2007 12:04 PM
  • Source: Scotland On Sunday
  • Location: Scotland
  • Related Topics: Standard Life
 
1

Scotty dog,

28/10/2007 02:46:19

It's "game on" for Sandy Crombie and his leadership credibility - I can't imagine that the former SLI CEO and his advisers didn't foresee that Pearl would leap back in so what have they planned as a countermove?

Placing a "for sale" sign on Lothian Road?

2

Germaine,

28/10/2007 07:47:49

I agree with #1 in that the SL Board must have reckoned that Pearl would have come back wth a higher offer. Therefore, the question is, what does Mr Crombie have up his sleeve in order to counteract the higher Pearl bid?

I would also point out that Sandy Crombie is very used to getting his own way, and is an extremely shrewd operator, so I would not bet against him winning in this takeover battle.

3

idee fixe,

TopOfTheMornin..AndTopOfTheLeague!! V 28/10/2007 10:51:05

This has been a wrong move for Standard Life from the getgo.
The market forces are never far wrong and Standard Lifes shares have plumetted from 357 to todays 278.50 almost entirely as a result of SL being mentioned in the same breath as Resolution.That was confirmed by the market on Friday once again.

No-one knows what went wrong with Standard Lifes supposed joint approach with Pearl to purchase Resolution and everyone watching was amazed when Pearl went with Royal London.

Standard Life,if they want to succeed must ironically,win Hugh Osmonds support.

Its not impossible,but it will be hugely expensive for existing Standard Life shareholders,whom Crombie said would be his first consideration.
Pull the other one.

4

charlie_rooo,

28/10/2007 13:04:39

So the drop in SL's share price had nothing to do with the overall drop in the level of the index from over 6700 to 6500-6650. SL shares have a high beta to the market and will therfore be more volatile.

And its normal for a companys shares to drop in price when takeover plans are announced, its a simple pair trade short the buyer long the seller, but its a short term trade, the market will eventually establish a fair price for the company once the takeover has played itself out.

If the fair price is at a big discount to the price before the takeover then you can talk about the market seeing it as a wrong move.

All we are seeing at the moment is short term volatility.

5

Active Sassenach,

Luton, England 28/10/2007 16:01:42

#4, charlie_rooo: "..high beta to the market..". Does this mean they follow the market closely and are not a leveraged play? That seems right as shareholders have no potential from the investment returns on the £25-30 billion legacy with profits fund, only the management charges.

I am opposing this deal as a shareholder and policyholder. Standard Life and Swiss re, who have taken over other closed funds, cannot be relied upon to treat customers fairly. If they get Resolution's Phoenix assets, my old Royal Life Policy will fall in with Standard Life and get wrecked like the with profits endowment that Standard Life forced me to sell to redeem my mortgage because they would not pay a proper early maturity value.

What should scare you is that the acquisition of Resolution's assets will make Standard Life a leveraged play as it contains a chunk of 90/10 business. This is not suitable for a company owned by so many individual shareholders. The drop in Standard Life's share price reflects the "winner's curse" more than it reflects general share prices and shows the market's estimate of the amount Standard Life is prepared to overpay.

Standard Life has not yet got its own house in order. It is too early for it to consolidate another company, especially by risking £4.9 billion of shareholders' money. Merger integration like this is notoriously tricky and highly risky. Swiss re's recent consolidations only worked because they dumbed their trading standards down to the lowest level of what they acquired.

If SL succeeds in bidding for Resolution, it will have to get FSA and OFT approval. Hugh Stevenson is a non-exec at Standard Life and the FSA. Lord Blackwell is a non-exec at Standard Life and the OFT. SL should be forced to publish a plan to manage those conflicts of interest. This especially as a combined SL plc/Swiss re and Resolution will be a near monopoly in closed life books.

6

Evan Owen,

Upper Gumtree 28/10/2007 17:11:04

FSA would want to merge ALL the life offices before they mess it all up in one big bang, that's a theory.

The losers will be the policyholders, but that is par for the course.

The winners will be the fat cats once again.

The shareholders should have sold at the top, but that's a matter of timing.

7

The Obvious Truth,

Edinburgh 29/10/2007 02:29:43

Christ between Evan and Toots it's like reading an Aldus Huxley novel. What a brave new world we live in where the candy coated lies are given to us and only the masters behind the scenes know what is going on.

Talking about shares nosediving after losing less than a hundred points, at the same time the entire market took a dive (which then followed a period of improvement before dropping due to the Resolution bid) and they have only been on the market for about a year.

Time and time again, stocks and shares are not short term investments, 1 year on the stock market is short term. End of.

And as for the whole endowment debate, where it is not a good thing that people didn't get back as much as was projected (Projected, not promised. Projections based, at the time, on the way the market was performing. Don't think this is coming from someone that didn't experience the same thing) that is just the risk to be taken with investment. I however understood the risks involved before making the decision to take an endowment so can't hold anyone else to blame when I didn't get back what I hoped for, that was the risk I knowingly took.

What you also need to understand is that where individuals can suffer from time to time with companies of this size the overall business is barely affected by these instances. So while I didn't get back what I wanted that does not mean that the company I have shares in won't perform in a manner over an extended period of time that will give me profitable return on my holdings.

So feel free to sell any shares you have, I will happily buy them as quickly as possible if this deal is successful.


 

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