Legal and General was lifted yesterday by talk of a possible bid, and comments today from acquisitive rival Resolution have done nothing to pour cold water on the idea.
Resolution - a FTSE 100 company now following its takeover of Friends Provident - said it was "targeting further transactions in the UK life and asset management sector as it sees significant value opportunities from the synergies and restructuring benefits available in this sector." It added it was working with Friends' management to "best position the business for future integration with other life assurance companies."
As part of the Friends' deal, the target's shareholders were offered up to £500m in cash but only £312m was used, with a large number taking shares instead. So Resolution has £310m in cash in total to help fund other deals, although a deal the size of L&G would obviously require most of the price to be paid in paper.
Analysts believe if Resolution is to make two deals within 13 months, as suggested, it will need to get a move on.
So L&G is in focus again, up 1.4p to 87.25p. Marcus Barnard at Oriel Securities said L&G would make a good fit for the enlarged Resolution, since there was enough overlap to make synergies possible. He added:
At the moment L&G don't seem very keen. But the management may say they don't want to go into this, but it would be interesting to see what the shareholders say if Resolution approach them.
If they went to L&G and said, we have identified say £500m of synergies, suddenly it becomes much more tangible.
He said L&G would be a good move for Resolution since, if successful, it would move them from a £2bn company to a £7bn company in one step, and put them in a strong position for further consolidation in the sector. He added:
At that size, raising £3bn in cash would look more do-able, and there are lots of targets at that level.
Of course, L&G is not the only suggested target, with Lloyds Banking Group's insurance businesses also likely to be on the radar screen.
Meanwhile Resolution's shares are up 0.5p at 97.65p, despite the company admitting that Friends third quarter sales reflected difficult market conditions.
