24th Oct 2007 07:01
Friends Provident PLC24 October 2007 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO ORFROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THERELEVANT LAWS OF SUCH JURISDICTION For immediate release24 October 2007 RESOLUTION PLC ("RESOLUTION") AND FRIENDS PROVIDENT PLC ("FRIENDS PROVIDENT")FRIENDS FINANCIAL GROUP PLC ("FRIENDS FINANCIAL") - FURTHER UPDATE Further to the announcement of the Friends Financial merger on 25 July 2007, andfollowing recent merger updates, the Boards of Resolution and Friends Providentare today announcing: • a target return of capital to Friends Financial shareholders in 2008 of £1 billion from existing and internally generated cash resources and where appropriate new debt, expected to be announced at the time of the 2007 results (1); • a target return of capital to Friends Financial shareholders by April 2009, to be financed from the disposal proceeds of certain existing lower return assets of Resolution with a combined embedded value of approximately £1 billion as at 30 June 2007(1); and • the Boards of Resolution and Friends Provident expect that Friends Financial will target an operating return on embedded value of at least 13 per cent. per annum for 2009 and beyond. The new operating return on embedded value target takes account of the targetreturns of capital, and reflects Friends Financial's approach to writing newbusiness, which includes: • a target IRR of 12 per cent. per annum for UK new business; and • the existing IRR of over 20 per cent. per annum achieved on Friends Provident international new business in 2006. These targets are in addition to Resolution's announced target dividend growthrate of 5 per cent. per annum, which will continue for Friends Financial. Following completion of the merger, a further review will be undertaken toidentify additional non-core assets for disposal across the wider FriendsFinancial Group. Clive Cowdery, Chairman Designate of Friends Financial, said: "With less than two weeks until the merger votes, our focus remains on thecompelling value for shareholders offered by Friends Financial. These financialtargets demonstrate the merged group's focus on delivering shareholder value andreleasing cash through the active management of the Friends Financial portfolioof businesses." The Extraordinary General Meetings and Scheme Meeting to approve the creation ofFriends Financial have been convened for 5 November 2007. (1) Each return of capital of £1 billion is equivalent to 74 pence per existingResolution Share (as per the current issued share capital of Resolutiondisclosed in Resolution's Rule 2.10 announcement of 12 October 2007) and 23pence per existing Friends Provident Share (as per the current issued sharecapital of Friends Provident, excluding treasury shares, disclosed in FriendsProvident's Rule 2.10 announcement of 15 October 2007) (based on ResolutionShareholders' and Friends Provident Shareholders' respective holdings in FriendsFinancial, before taking into account the conversion of outstanding FriendsProvident Convertible Bonds, of 50.9 per cent. and 49.1 per cent.). As previously announced, Friends Financial intends to manage the CombinedGroup's balance sheet on metrics consistent with an "A" rating at holdingcompany level (with debt to gross embedded value gearing normally in the rangeof 25 to 35 per cent.). The targeted returns of capital will be subject to final approval of the FriendsFinancial board, having regard to their fiduciary duties, applicable regulationand prevailing market conditions. It is proposed to generate distributablereserves to enable the targeted return of capital in 2009 through a combinationof realised profits and group restructuring including the previously announcedmerger of Resolution's life funds. Enquiries Friends Provident ResolutionNick Boakes Steve Riley+44 (0)845 641 7814 +44 (0)20 7489 4884 Finsbury Temple Bar AdvisoryVanessa Neill Alex Child-Villiers+44 (0)20 7251 3801 +44 (0)20 7002 1080 +44 (0)7795 425 580 Defined terms used in this announcement are the same as those used in the RNSannouncement of 10 September 2007 unless otherwise stated. The anticipated uplift in embedded value of £250 million arising from the mergerof certain of Resolution's life funds announced on 10 September 2007 constitutesa profit forecast for the purposes of Rule 28.5 of the City Code. The Directorsand the Proposed Directors believe the forecast remains valid for the purposesof the Merger and have received indications from each of Ernst & Young, Lazardand Citi that they have no objection to their profit forecast reports continuingto apply. Lazard & Co., Limited (''Lazard'') is acting as financial adviser to Resolutionand no one else in connection with the merger and will not be responsible to anyother person for providing the protections afforded to the clients of Lazard norfor providing advice in relation to the merger or any other matter referred toin this announcement. Citigroup Global Markets Limited (''Citi'') is acting as financial adviser toResolution and no one else in connection with the merger and will not beresponsible to any other person for providing the protections afforded to theclients of Citi nor for providing advice in relation to the merger or any othermatter referred to in this announcement. Under the provisions of Rule 8.3 of the City Code, if any person is, or becomes,"interested" (directly or indirectly) in 1% or more of any class of "relevantsecurities" of Friends Provident or Resolution all "dealings" in any "relevantsecurities" of that company (including by means of an option in respect of, or aderivative referenced to, any such "relevant securities") must be publiclydisclosed by no later than 3.30 pm (London time) on the London business dayfollowing the date of the relevant transaction. This requirement will continueuntil the date on which any offer becomes, or is declared, unconditional as toacceptances (or, if implemented by a scheme of arrangement, such scheme becomeseffective), lapses or is otherwise withdrawn or on which the "offer period"otherwise ends. If two or more persons act together pursuant to an agreement orunderstanding, whether formal or informal, to acquire an "interest" in "relevantsecurities" of Friends Provident or Resolution, they will be deemed to be asingle person for the purpose of Rule 8.3. Under the provisions of Rule 8.1 of the City Code, all "dealings" in "relevantsecurities" of Resolution by Friends Provident or of Friends Provident byResolution, or by any of their respective "associates", must be disclosed by nolater than 12.00 noon (London time) on the London business day following thedate of the relevant transaction. A disclosure table, giving details of thecompanies in whose "relevant securities" "dealings" should be disclosed, and thenumber of such securities in issue, can be found on the Takeover Panel's websiteat www.thetakeoverpanel.org.uk "Interests in securities" arise, in summary, when a person has long economicexposure, whether conditional or absolute, to changes in the price ofsecurities. In particular, a person will be treated as having an "interest" byvirtue of the ownership or control of securities, or by virtue of any option inrespect of, or derivative referenced to, securities. Terms in quotation marks are defined in the City Code, which can also be foundon the Takeover Panel's website. If you are in any doubt as to whether or notyou are required to disclose a "dealing" under Rule 8, you should consult theTakeover Panel. The Friends Provident Directors each accept responsibility for the informationcontained in this announcement other than information relating to the Resolutionprofit forecast for which responsibility is taken by Resolution Directors andthe Proposed Directors. To the best of the knowledge and belief of the FriendsProvident Directors (who have taken all reasonable care to ensure that such isthe case), the information contained in this announcement for which they areresponsible is in accordance with the facts and does not omit anything likely toaffect the import of such information. The Resolution Directors and the Proposed Directors each accept responsibilityfor the information contained in this announcement. To the best of the knowledgeand belief of the Resolution Directors and the Proposed Directors (who havetaken all reasonable care to ensure that such is the case), the informationcontained in this announcement for which they are responsible is in accordancewith the facts and does not omit anything likely to affect the import of suchinformation. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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