U.S. News

Insurers Resolution, Friends Provident in $16 Billion Merger Talks


British life insurers Resolution and Friends Provident confirmed on Monday that they are in advanced merger discussions that could lead to the creation of a group worth over 8 billion pounds ($16.4 billion).

If agreed, the merger would involve an all-share combination, with Resolution shareholders owning 50.9% of the combined group and Friends Provident shareholders owning 49.1%, the two sides said.

"Friends Provident and Resolution believe that a merger would create significant value for both sets of shareholders by combining Friends Provident's new business growth opportunities with Resolution's strong cash flow generation," the two sides said in a statement.

Sources familiar with the matter had said on Saturday that the two sides were in merger talks.

The two insurers aim to hammer out the outline of a deal in the next fortnight, in time for Friends Provident's interim results on August 8, the sources said over the weekend.

Monday's statement did not include details on the value of the deal or on a possible split of top management jobs. At Friday's closing prices, the two groups would be worth a combined 8.3 billion pounds ($17.1 billion), making them Britain's fourth-largest life insurer.

Clive Cowdery, the entrepreneurial chairman of Resolution who set up the insurer in 2003, is expected to take that top job in any combined group, but it is unclear who would become chief executive. One source close to the matter indicated over the weekend that Resolution's Mike Biggs could become chief executive of the merged insurer with Friends Chief Executive Philip Moore becoming deputy chief executive.

However, both Biggs and Moore are former finance directors who have only taken the helm this year.

After months of speculation over possible consolidation in the U.K. life insurance sector, confirmation of talks between its two smallest blue chip players could flush out other deals as well as other suitors, particularly for Friends.