Standard Life may restructure Resolution bid

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LONDON (Reuters) - Insurer Standard Life , whose 4.9 billion pound bid for Resolution has been challenged by another rival Pearl, may change the structure of its offer to win its target, it said.

Standard Life said it was exploring, jointly with Resolution, "a number of options for restructuring its proposed offer".

The options include proceeding by way of a takeover rather than a scheme of arrangement, it said in a statement on Sunday, confirming earlier comments from sources.

Edinburgh-based Standard Life, backed by Swiss Re , said it continues to believe strongly in the strategic rationale of the deal and that its offer "provides compelling value".

It unveiled its cash-and-share offer on Friday, which was supported by Resolution’s board.

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But that offer, worth just over 716 pence at Friday’s closing prices, was trumped less than an hour later by an all-cash 720p per-share approach from Pearl, also Resolution’s top shareholder with a stake of just over 24 percent.

Under the current scheme structure for its offer, even if it retains the board’s blessing, Standard Life needs 75 percent of Resolution shareholders present and voting to approve the offer, which means Pearl could block the deal.

By restructuring a deal as a takeover Standard Life could lower the approval threshold to 50 percent.

That alone might not be enough to stop Pearl from blocking a key aspect of the deal -- the 2.35 billion pound sale of some Resolution assets to reinsurance giant Swiss Re for cash -- and so would have to be backed with other changes, sources close to the 3said.

Resolution, whose recommendation of Standard Life’s offer is predicated on a deal being deliverable, could ask for more clarity from the former mutual as early as Monday.

The sources said Resolution was unlikely to immediately switch recommendations to back arch-rival Pearl, but the insurer’s board will be under pressure to consider options including withdrawing or suspending its backing for Standard Life’s offer.

The Swiss Re deal accounts for roughly half of the funds to pay for Standard Life’s move, with the rest coming from 1.3 billion pounds ($2.67 billion) in debt and a share issue amounting to roughly 1.4 billion.

Analysts have said Standard Life is unlikely to offer substantially more cash but could consider adding more equity to sweeten the deal or bring in another partner.

"Standard Life has to offer comfort to Resolution’s board, reassuring them that their deal is better and that it will go through," one of the sources said.

Another source said: "You have to think they were expecting the move Pearl made, and that they are holding something back."

Another of the sources said: "With a cash bid, Resolution’s board will have to take stock." A recommendation from Resolution’s board is a key condition for the Standard Life offer.

Resolution and Pearl declined to comment on Sunday.

Resolution, which like Pearl specialises in life funds closed to new business, has been targeted by suitors since it announced plans to merge with Friends Provident in July. That merger plan was officially dropped on Friday.

(Additional reporting by Steve Slater)

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