04 Feb, 2008
Published: 12:47 Monday 04 February 2008
By: Chris Marshall, Insurance Correspondent
(update) Life insurer Friends Provident
could be broken up and sold to rival insurers, if the expected
takeover bid by JC Flowers proves successful, analysts are
The private equity giant had indicated its intention to explore a
bid some weeks ago but the result of Friends Provident's
strategic review announced last week looks to have made the insurer
more vulnerable to a buy-out.
Speculation is mounting that JC Flowers will seek to take advantage
of Friends Provident's distressed share price to make a formal
bid for the insurer as early as this week.
Friends Provident shares slumped significantly last week but have
rallied a little today to a price of 142.5p by 13.24pm up 6.5p or
4.8% on the day.
Analysts expect more potential bidders to come along, although it
is thought unlikely that a rival insurance company would take on
the whole business.
Peter Eliot, an analyst at MF Global Securities in London, said:
'The other insurance providers would have trouble turning the
company around. It is much more likely that they would buy little
bits from people like JC Flowers.'
He said JC would retain very little of the business if its bid was
KBW analyst Grieg Paterson said: 'Management refused to rule
out a full takeout of Friends Provident. JC Flowers has stated an
intention to acquire the company and has built up a circa 3% stake.
We believe others could also enter the fray.'
Collins Stewart analyst Tim Young also pointed out that it is a
buyers market. 'There is no shortage of suitors for players in
the UK market, where demand is increasing, competition diminishing
and profitability set to improve. Chris Flowers has already
indicated an interest in Friends Provident and we think he is
'There remains the question, why would one buy Friends rather
than L&G but perhaps this is the superior turnaround
Flowers may hope to move on the insurer before incoming chief
executive, the former UK head at Standard Life Trevor Matthews,
joins the firm in six months.