BY Times Online

Tempus comment: Diving for Pearl
Hugh Osmond's closed life fund manager is likely to seize on today's shareholder circular from Resolution and Friends Provident detailing their £8.4 billion ...

So now we wait to see whether the Pearl sparkles.

Hugh Osmond's closed life fund manager is likely to seize on today's shareholder circular from Resolution and Friends Provident detailing their £8.4 billion merger proposal to create Friends Financial.

If they can find any more fuel to their argument that the combination looks shaky, Mr Osmond and his advisers will move swiftly. We may even see an all-cash counter-bid on the table before the week is out.

Given the level of a bid — analysts speculate that Pearl will need to pay at least £5 billion, of which £3 billion will be borrowed — it may not move alone.

Suggestions that it might bid alongside Standard Life for Resolution have taken on more weight in the past few weeks.

Substantial borrowing can be difficult in today's environment, and between the two of them they could probably offer a realistic sum and then carve up Resolution's assets.

Pearl does not want to pay more than 660p, however. This would be a small premium to Resolution's 623p-a-share value used as a starting point for the purposes of the Friends Financial merger.

But it would be a near-4.5 per cent discount to the 691p at which investors are valuing Resolution today.

The initial valuations of Resolution and Friends Provident make for a combined worth of 815p. However this is before any additional synergies and valuation multiples are taken into account.

Pearl wants nothing of Friends Provident, of course. But right or wrong, Pearl will have to counter the embedded belief among shareholders that any bidder for Resolution must pay well above 700p to be victorious.

It would be no surprise to see Pearl bypass management and take its case direct to shareholders.

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