Resolution, AXA UK May Ink GBP2.75B Deal This Week - Source

21st Jun 2010 13:36

By Vladimir Guevarra Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Resolution Ltd (RSL.LN), the consolidation vehicle of U.K. entrepreneur Clive Cowdery, and French insurer AXA SA (CS.FR) are expected this week to announce a GBP2.75 billion deal for Resolution to buy AXA's U.K. life operations, a person familiar with the situation told Dow Jones Newswires Monday. "They are working towards the end of this week," the person said, adding that even though the announcement may be moved to next week, it is more likely to be done this week. Resolution and AXA last week said they were in negotiations. If the deal succeeds, AXA's U.K. life operations--which include its annuity, protection and group pensions businesses--will be merged with Friends Provident, the life insurer bought by Resolution last year for GBP1.86 billion. Resolution hopes to create cost and revenue synergies between the two companies and build a bigger and more competitive company. It would mark the continuation of Resolution's strategy to consolidate companies in the U.K. life insurance and asset management industry, with the aim of listing a new merged entity in the next few years. Resolution said the price tag for AXA's U.K. life business will be funded by a pre-emptive rights issue of around GBP2 billion, GBP500 million of deferred consideration notes issued to AXA and through bank debt. Citigroup is acting as a broker for Resolution on the deal and Credit Suisse is advising AXA. Previous reports said Barclays Capital and Royal Bank of Canada will be the chief underwriters for the GBP2 billion rights issue. Other reports said Resolution's shareholders may reduce the role of investment banks in the deal by acting as a coordinated group of sub-underwriters, though the details of this move are still unclear. Analysts have generally welcomed the imminent deal as a "sensible" move. "This would seem to be sensible next step for Resolution, buying a reasonable business from a willing seller at what on first glance appears to be a realistic price," Oriel Securities analyst Marcus Barnard said. Citigroup analyst Raghu Hariharan estimated that the GBP2.75 billion price represents 80% of the asset's forecast 2009 embedded value. "Resolution has enough headroom to make this deal value creative in the longer term," he said. -By Vladimir Guevarra, Dow Jones Newswires; +44 (0) 2078429486, [email protected] (END) Dow Jones Newswires June 21, 2010 08:36 ET (12:36 GMT)