28th Sep 2007 16:30
Resolution PLC28 September 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 release 28 September 2007 RESOLUTION PLC Resolution plc ("Resolution") and Friends Provident plc ("Friends Provident")continue to progress the implementation of their agreed merger to form FriendsFinancial Group plc ("Friends Financial"). The Board of Resolution believes that the agreed merger with Friends Providentwill create significant value for Resolution's shareholders through their 50.9%share of the value of Friends Financial, which comprises: * combined embedded value;* value of the combined new business franchises;* value of the asset management businesses; and* merger synergies. Resolution notes recent speculation in relation to potential offers for thecompany and confirms that it is providing continued due diligence andmanagement meetings to potential offerors, as it has done under Rule 20.2 of theTakeover Code since shortly after the announcement of the merger. Resolutionalso confirms that it is not in receipt of any offers from any such offerors. Resolution and Friends Provident intend to post documentation relating to themerger to their shareholders in early October 2007. In order to ensure thatshareholders have sufficient time to consider any alternative offers (should anybe forthcoming), Resolution is requesting the Takeover Panel to set a timetableby which potential offerors must clarify their intentions and make any offers insufficient time to allow Resolution shareholders to consider any such offersprior to the forthcoming EGM vote. Enquiries Resolution Temple Bar AdvisorySteve Riley Alex Child-Villiers+44 (0)20 7489 4884 +44 (0) 20 7002 1080 +44 (0)7795 425 580 Annex 1 The Board of Resolution believes that the agreed merger with Friends Providentwill create significant value for Resolution's shareholders through their 50.9%share of the value of Friends Financial: * the combined embedded values of Resolution and Friends Provident, and the market value of Friends Provident's interest in F&C Asset Management plc, which, in aggregate, amount to £8,454 million (see note 1); plus * the value of the combined new business franchise, which in 2006 would have produced approximately £250 million of new business profit before tax (see note 2). This combined new business franchise has continued to show strong momentum in 2007, as demonstrated by the performance of both Friends Provident and Resolution in the first half of 2007; plus * the goodwill value ascribed to Resolution Asset Management (H1 2007 operating profit before tax of £24 million), in excess of the goodwill of £135 million included in embedded value; plus * the value of cost and financial synergies of £100 million per annum before taxes, as announced with the Friends Financial merger on 25 July 2007 less £120 million one-off implementation costs before taxes; plus * the additional value from the recent acquisition of the 65 strong Scottish Provident broker consultant business from Abbey; plus * the value ascribed to elements not included above, such as Resolution's service company (2006 operating profit before tax of £15 million), less corporate costs; plus * the revenue synergies and ongoing developments as set out below. Through the combination of Resolution's cashflow generation and FriendsProvident's new business capability, Friends Financial can provide shareholderswith both profitable new business growth, growing dividend income and theprospect of a return of capital to shareholders in 2008. The combined business will have a leading position in the UK in group pensionsand will rank third in protection with a market share of approximately 14 percent. Friends Provident's international new business has been growing fast andhad an IRR of 25.7 per cent in 2006. In addition, Resolution and Friends Provident see specific areas to accelerateprofitable new business through: * Friends Provident's existing annuity product being made available to capture a share of the approximately £900 million p.a. of vesting pensions on Resolution's books; * greater penetration of the Abbey bancassurance relationship, with Friends Provident's broader product suite, national sales and training network, and experience of servicing other bank distribution partners; and * developing new business products under the Friends Provident brand for the approximately 7 million customers on Resolution's in-force books. Note 1: £8,454 million is derived on the basis of: * Resolution's published 30 June 2007 embedded value of £4,340 million (excluding goodwill); plus * the estimated increase in embedded value of approximately £250 million after tax and implementation costs arising from Resolution's proposed fund merger in 2008, as announced on 18th September, 2007; plus * the outsourcing transaction with Capita of £56 million; plus tax * Friends Provident's published 30 June 2007 embedded value of £3,808 million. Note 2: Based on Friends Provident's published 2006 pre-tax value of newbusiness of £204 million and Resolution's pre-tax value of new business for thesix months ended 31 December 2006 of £23 million, annualised (Resolution did notown the new business operations in the first half of 2006). Under the provisions of Rule 8.3 of the 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 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 Code, which can also be found on theTakeover Panel's website. If you are in any doubt as to whether or not you arerequired to disclose a "dealing" under Rule 8, you should consult the TakeoverPanel. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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