Friends rejects $7 bln JC Flowers takeover offer
LONDON (Reuters) - British insurer Friends Provident FP.L rejected a 3.5 billion pound ($7 billion) cash takeover proposal from U.S. private equity firm JC Flowers because it "significantly undervalues" the firm, Friends said.
On Monday, Friends said it received the 150 pence per share indicative proposal last Thursday and Flowers had indicated the offer price would be reduced in the event that Friends paid its 2007 final dividend of 5.3p a share at the end of May.
Friends said the proposal "does not represent a basis for discussion", signaling the two sides have not held talks.
By 11:15 a.m. EDT, its shares were up 2.8 percent at 123.4 pence after hitting 125.8p, reflecting an expectation that Flowers would return with a modestly improved offer, dealers said.
"I would be surprised if a higher offer didn't come," said Peter Eliot, an analyst at MF Global. "I don't think that will be Flowers's final offer, there's a lot more value in the business than that."
A spokesman for Flowers said it was digesting the swift reaction from Friends and considering its options.
Flowers has been circling the troubled insurer for months, and said in January it might make an offer.
It was considering paying 175p at that time, a person familiar with the situation had said, but was rejected by Friends whose shares have fallen sharply since.
Major shareholders were now likely to hold out for an offer nearer 160p, Eliot said. Friends said this month 160p was the embedded value of the shares, reflecting the actuarial value of the company.
Analysts said other suitors could be interested in all or parts of Friends, but tough financial market conditions may temper interest in the short term.
Flowers, headed by Chris Flowers, is one of the biggest buyout firms focusing on financial sector targets.
It said in January it had bought 2.7 percent of Friends and last month called for a meeting with the insurer.
There has been speculation Friends has asked, or will ask, Britain's Takeover Panel to issue a "put up or shut up" notice, forcing Flowers to make a firm offer or walk away. Friends declined to comment on whether it had sought this.
Friends shares have tumbled from over 190p a year ago, on a failed merger with rival Resolution (RSL.L), questions over the strength of its balance sheet, troubles in its core UK business, a dividend cut and a big charge for customers leaving early.
In January, it announced plans to sell two of its biggest units and cut 600 jobs in a radical overhaul.
(Editing by Quentin Bryar, Quentin Webb and David Hulmes)
($1=.5005 Pound)
