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Friends rejects £3.5bn Flowers bid

The UK insurer said the US buyout firm’s bid undervalues the company despite a 22 percent premium to the share price.

Insurer Friends Provident has rejected an approximate £3.5 billion ($6.95 billion; €4.4 billion) bid tabled by global buyout firm JC Flowers last week, according to a statement.

Flowers: bid
by Friends

Flowers tabled a bid at £1.50 per share, indicating its offer would be reduced should Friends Provident pay its planned 0.053 per share dividend.

The statement said: “The Board of Friends Provident informed JC Flowers that its proposal significantly undervalues Friends Provident and its prospects and does not represent a basis for discussion.”

The bid is below the insurer’s published pro forma embedded value of £1.60 per share for the year ending 31 January 2008 and the planned £4.2 billion merger agreed with insurer Resolution last year. That deal fell through, and Resolution was sold to rival Pearl.

It is also less than the £1.75 per share JC Flowers tabled last year. But it is a premium to the insurer’s share price, which was trading up 3.16 percent at 0957 GMT at £1.23 per share, although this was significantly down on last year’s high of £2.10 per share.

The JC Flowers offer value Friends Provident at less than the £3.8 billion it raised from its initial public offering at £2.25 per share in 2001.

JC Flowers was one of several bidders attempting to takeover struggling UK bank Northern Rock, but it left the bidding after Richard Branson’s Virgin Group was granted preferred bidder status in December. The bank was subsequently nationalised by the UK government.