UPDATE 3-Friends Provident rejects Cowdery's merger plan

* Friends Provident rejects Resolution approach

* Resolution proposes 0.8 new share for every Friends share

* Values at 1.7 bln stg based on Resolution's Friday close

* Friends shares rise 10 percent, Resolution down 2pct

(Updates shares, adds Resolution shareholder comment)

By Quentin Webb and Lorraine Turner

LONDON, July 13 (Reuters) - Friends Provident (FP.L) rejected a takeover proposal from Clive Cowdery's Resolution Ltd (RSL.L), saying the entrepreneur's terms were inadequate, his company was opaque and a tie-up would hobble the life insurer's management.

However a sharp rise in Friends Provident Group Plc shares on Monday pointed to investor expectations of a sweetened offer and some analysts hailed what could be the first step in a long-awaited consolidation of the sector.

Friends Provident said Cowdery's Resolution, based on the island of Guernsey, had proposed an all-stock deal consisting of 0.8 new Resolution shares for every Friends share.

That would value Friends at about 1.69 billion pounds ($2.7 billion), based on Resolution's Friday closing price of 90-1/4p.

But the target said this was wholly inadequate to compensate its 750,000 shareholders for a "very different type of investment" which would be created if the two groups combined.

It said the proposed set-up's complexity would hinder Friends Provident management strategically and operationally and would offer shareholders less transparency.

"We are open-minded about the benefits of industry consolidation, but at this stage, the pace, direction and value of your consolidation strategy is speculative and uncertain," Friends Chairman Adrian Montague wrote in a letter to Resolution published on Monday.

The proposed deal would leave Friends shareholders with about 74 percent of the combined group.

DIFFICULT OUTLOOK