Friends Provident and Resolution have agreed terms for an £8.6bn all share merger to become the Friends Financial Group, just two days after announcing a possible deal.
Conditional on shareholder, regulatory and other approvals, the merger is expected to give Resolution shareholders 50.9% of the new company and Friends Provident 49.1%.
In a joint statement, the firms say the merger “create a significant new force in the UK life and pensions market”.
“Through its combination of new business capability and cash flow generation, Friends Financial can provide shareholders with both profitable new business growth and growing dividend income,” it says.
“At the core of the combination is the complementary fit between Friends Provident and Resolution, which extends across products, customers, distribution, financial profiles and management.”
The statement says advice received by both companies led them to consider the merger to be “fair and reasonable”, and directors intend to unanimously recommend the joint venture to their respective shareholders.
It also states the merger is expected to generate at least £100m in annualised pre-tax cost savings and financial synergies by the end of 2010.
The new board will consist of Resolution’s Clive Cowdery as chairman; deputy chairman will be Friends Provident Sir Adrian Montague, while Resolution’s Mike Biggs will be chief executive and Friends Provident’s Philip Moore deputy chief executive.
Resolution shares will be cancelled and new shares issued to Friends Provident shareholders.
Each Resolution share is worth 3.25 Friends Financial shares.
Formal documentation is expected to be sent to both sets of shareholders shortly after Resolution’s interim results on 18 September, with shareholder meetings expected to be held in mid-October 2007.
The merger is expected to be completed during the fourth quarter of 2007.
"Today’s transaction marks a turning point in the restructuring of the UK life industry,” Resolution chairman Clive Cowdery says.
Friends Provident chief executive Philip Moore says two groups believe they can create a powerful new player in the life and pensions industry.
“The opportunity exists to provide products and services which will attract significant demand from customers and generate value for shareholders,” he says.
“Friends Financial will have all the capabilities in place to deliver on this opportunity."
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