Pearl move puts F&C deal in doubt

F&C’s proposed acquisition of Resolution Asset Management (RAM) was thrown into doubt last week, after Pearl Assurance increased its stake in the Resolution group to 11.28%. The move followed an announcement that Pearl is seeking to “explore alternative opportunities” with the board of Resolution.

Pearl, which increased its holding further on Friday to 15.85%, is hoping to scupper the merger of Friends Provident – which owns 52% of F&C – and Resolution. The two life companies confirmed that they were in advanced discussions on a deal at the start of the week.

Under the terms of the deal, Friends Provident shareholders would own 49.1% of the combined company, with Resolution shareholders holding the remaining 50.9%.

F&C’s bid for RAM is effectively independent of the merger and would require support from its minority shareholders, including Eureko, a Dutch-based European insurance group and the former owner of F&C.

Nick Criticos, head of UK retail and investment trusts at F&C, says the firm is conducting due diligence to establish a suitable price for RAM. He confirms that Alain Grisay, F&C’s chief executive officer, would lead the integration process and retain his role in the combined firm.

F&C’s approach has led to speculation over how RAM’s boutique operations would react to such a deal. The biggest, Argonaut, announced that it passed £1 billion in assets under management earlier this year.

Fund Strategy understands that the businesses, which are half owned by RAM and half by the boutique partners, have change of ownership clauses, allowing them to gain independence in the event of a merger or acquisition.

Criticos says F&C has a three-year growth plan built around a “multi-boutique” model, and adds that the firm is “excited about a bigger and better boutique strategy”.

Despite Criticos’ upbeat outlook, questions would remain over the future of RAM’s recently-announced multi-manager joint venture. F&C has an established fund of funds team, headed by Richard Philbin.