Equitable Life will officially go on sale in late August and it hopes to generate an auction between...
Equitable Life will officially go on sale in late August and it hopes to generate an auction between potential buyers.
Equitable is preparing a memorandum for sale, which will be ready in the week beginning 21 August.
Until then, no formal offer can be made by potential bidders but Nigel Webb, head of public relations at Equitable Life, said there has already been a lot of interest in acquiring the mutual.
Roman Cizdyn, an insurance analyst at Merrill Lynch, said the company will have to demutualise first in order to allow transfer of ownership to the eventual buyer.
He added: "The only way around it is if an existing mutual like Standard Life were to buy it. If the Prudential or Axa bought it, Equitable would have to change ownership from a policyholder to a share ownership basis."
Cizdyn said Equitable's statement, after the House of Lords ruled it was liable for a £1.5bn payout to policyholders, indicated the mutual could face insolvency if it did not find a buyer.
If a company facing financial difficulties goes insolvent the Policyholders Protection Act comes into force and the whole industry has to pay to cover most of the costs.
Cizdyn said the level of interest in Equitable meant it would probably go to an auction. He added the FSA would be likely involved in scrutinising bidding companies' suitability to ensure capital adeq- uacy since the target firm is facing insolvency.
Equitable plans to identify a purchaser by the end of the year with the expectation that a deal will be set the following summer.
The sale is subject to member approval and, Webb said the interest from potential bidders is increasing the likelihood that the board could negotiate the sale in members best interests.
Equitable has also announced a package for its salesforce which is expected to come under scrutiny from rival providers such as Rothschilds, Sun Life of Canada and Allied Dunbar.
Equitable was forced to withdraw bonuses for non-guaranteed with-profits policy holders for the period between 1 January and 31 July to meet the costs of its £1.5bn liability. Bonuses will be reintroduced at previous levels after this period.
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