Cowdery's Resolution offers £2.8bn for Axa in UK

RESOLUTION, Clive Cowdery's insurance acquisitions vehicle, has bid about £2.8 billion for Axa's UK life assurance business.

It intends to create a new enlarged life, protection, annuities and group pensions business by merging Axa's UK operations with those of Friends Provident, which it acquired last year for 1.8bn.

The move was confirmed late Friday and will surprise those who expected Cowdery to focus on Prudential's British business. A further announcement is expected tomorrow.

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The statement said: "Resolution confirms it is in discussions. If implemented, this transaction would result in the acquisition of the majority of AXA's life assurance operations in the UK, including its businesses in the risk areas of protection and annuities and also its group pensions business. Resolution intends to consolidate the AXA businesses with its Friends Provident operations.

"The combination would create one of the UK's largest providers of protection products and group pensions services. There is no certainty these discussions will result in a transaction."

Axa is one of the world's biggest insurance companies with a market capitalisation of 24bn. It has ten million customers and 11,000 UK employees and includes Sun Life Direct. But sales of its life and pensions products fell 18 per cent last year. It is thought there would be substantial savings from a merger, but also job losses.

The offer follows Cowdery's commitment ahead of the Friends acquisition to undertake a number of deals in the UK after raising 600m in a stock market listing.

Initial attention focused on Scottish Widows, Legal & General and Aegon, but has recently switched to Prudential, which has been rumoured to be considering the future of its UK business. Its aborted plan to acquire AIG's Asian assets may have stalled that plan. However, Cowdery has received up to 5bn in funding support from the Royal Bank of Scotland and Royal Bank of Canada.

Markets will be on alert for a possible tie-up of Axa UK and Friends Provident that Cowdery will scale up ahead of a flotation or sale some time in the next two years.

Resolution's Axa offer appears to herald another round of consolidation. Private equity firm Apollo will meet its advisers this weekend to decide whether to increase its 785m offer for Brit Insurance which rejected a 10 a share offer on Thursday. Shares in Brit, a Lloyd's of London insurer, soared 20 per cent on the news. Brit specialises in property and casualty insurance and sponsors the England cricket team.

Analysts believe companies across the Lloyd's market are undervalued and that it is tempting bidders seeking bargain deals.

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Brit announced a 31 per cent leap in pre-tax profits in February over the previous year, but it revealed last month that the earthquake in Chile would mean a 48m hit to this year's results.

• SPANISH bank Santander is believed to have cut its offer from 2bn to below 1.8bn to acquire 318 branches from Royal Bank of Scotland ahead of tomorrow's bid deadline, apparently after assessing the quality of the loan book.

Santander is expected to be the preferred bidder after other candidates withdrew. A deal for the branches, almost entirely in England, is expected this year.

US private equity groups Advent International and Bain Capital are favourites to acquire RBS's payment processing arm.