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£400M RESOLUTION MOVE TO GRAB B&B

BIG PLANS: Cowdery says he will reveal details by July 4

Tuesday June 24,2008

By Andrew Johnson, Associate City Editor

Former insurer Resolution is looking to pump £400million into beleaguered lender Bradford & Bingley as part of plans to create a new banking giant.

The move would replace B&B’s current plans to raise the cash by selling a 23 per cent stake to private equity firm TPG for £179million and a rights issue.

If successful, Resolution would then invest up to £2billion of City money in snapping up other small banks, lenders and building societies.

Resolution, which sold its insurance business to Pearl, said it had been invited to make a proposal by some of B&B’s biggest shareholders, including Standard Life, Prudential, Legal & General and Insight, HBOS’s asset-management arm. They own around 14 per cent of the company.

They have been infuriated by B&B giving TPG first choice on new shares at a massive discount and slashing the original rights price from 82p to 55p. B&B shares fell 2dp to 66p.

In a statement, Resolution provided no details of how a deal might be structured, although it could end up owning more than 30 per cent of the bank.

But it is not looking to take over the bank and would seek a waiver on City rules that anyone owning more than 30 per cent of a company has to make a takeover offer. Resolution said full details of its plans would be revealed by July 4. It said yesterday’s statement was designed to attract more investors to the fold.

Banking sources said Resolution had made an indicative offer over the weekend. This was £400million in new shares at 72p a share, giving it 49.9 per cent of the company.

B&B rejected the deal, arguing Resolution, run by entrepreneur Clive Cowdery, was seeking control without paying a proper premium. It said it was still fully committed to TPG.

Resolution said it wanted to create a “new, larger and stronger bank” and had identified around 15 possible targets, including subsidiaries of major banks.

Possible targets include Alliance & Leicester, which has recently fallen out of the FTSE 100 index, and specialist lenders Paragon and Kensington. Subsidiaries could include the HSBC’s UK lender HFC.

However, savings are likely to prove crucial to the plan, putting small building societies firmly in the frame.

Cowdery built up his first version of Resolution by buying closed life or “zombie” funds to create a FTSE 100 insurance company. He sold it to rival Pearl earlier this year.