British insurer Resolution recommended shareholders accept a $10 billion offer from rival Standard Life on Friday and backed away from its proposed takeover of Friends Provident.
Rival bidder Pearl Group immediately raised its own offer for Resolution, valuing the company at $10.4 billion (5.1 billion pounds), and said it had boosted its stake in the insurer.
Standard Life, under the deal recommended by Resolution, will pay a 49 million pound ($100.4 million) breakup fee to Friends Provident as part of the 4.9 billion pound bid. Resolution had offered $7.5 billion (5.27 billion euros) for Friends Provident.
"Resolution has recommended this offer as it believes that this business combination represents an attractive balance for Resolution shareholders who will receive a substantial proportion of their investment in cash while retaining an equity interest in the value expected to be delivered from the enlarged Standard Life group," the company said in a statement.
Under that deal, Switzerland's Swiss Reinsurance would purchase around 4.5 million Resolution policies and assets of around 31 billion pounds ($63.5 billion) from Standard Life.
Standard Life made its bid just before the Thursday deadline expired. Resolution had already rejected two takeover bids from Pearl.
The Standard Life offer, with a per share value total of 715 pence ($14.67) was about 25 pence (51 cents) per share higher than Pearl's sweetened all-cash offer of 691 pence ($14.14) per share made -- and rejected -- a week ago.
However, Pearl on Friday improved that all-cash offer to 720 pence ($14.80) per share as it revealed it had increased its stake in Resolution to 22.2 percent, from 16.5 percent.
Pearl added that Resolution shareholders could keep an interim dividend of 9.17 pence (18.8 cents) per Resolution share paid on Friday to shareholders.
Resolution shares were up 2.2 percent at 725 pence ($14.85) on Friday.
Pearl said it would seek a recommendation for its offer from Resolution, and had requested a meeting with the board.