UK - Friends Provident has confirmed it has rejected an offer from US private equity firm J.C. Flowers to acquire the firm for 150p a share.

In a statement to the London Stock Exchange, Friends Provident revealed it had received a firm proposal, which valued the company at approximately £3.5bn (€4.4bn), on March 27.

However, the insurance firm, which had approximately £7.6bn pension assets under management at December 31 2007, said the proposal suggested the offer price could be reduced if Friends Provident goes ahead with plans to issue the 2007 final dividend of 5.3p a share.

As a result, the Board of Friends Provident confirmed it has rejected the offer, as it "significantly undervalues Friends Provident and its prospects, and does not represent a basis for discussion".

Instead, the firm claimed it remained "focused on the implementation of its strategic review", which includes the possible sale of F&C Asset Management, and the wealth management businesses of Lombard and Pantheon Financial. (See earlier IPE story: Friends Prov to sell F&C and Lombard)

Friends Provident also admitted it would update shareholders on its progress with the review - which will focus on the 'core strengths' of the protection and group pension markets - in August at the firm's 2008 interim results.

Confirmation of the offer and the Board's rejection follows a prolonged period of speculation, as JC Flowers admitted in January it was considering the acquisition of Friends Provident, after it acquired a 2.7% holding in the company, but did not reveal any further details.

However, in its preliminary results Friends Provident stressed its strategic review would provide the company with "a sound and solid future, not dependent on anybody else" and reiterated would be self-financing and would not require any new debt or equity financing.

In addition, the results - released earlier this month - revealed the Friends Provident defined benefit pension scheme recorded a surplus of £5m at the end of 2007, equal to 0.5% of its assets, compared to a deficit of £31m in 2006.

The firm attributed the improvement to good investment performance and changes to financial conditions, in particular an increase in the interest rates used to discount liabilities, although it highlighted over the year it had reduced its equity allocation from 65% to 40% which had also reduced sensitivity to market volatility.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com.

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