Prudential and Standard Life were drawn into takeover speculation yesterday after a leading player in the life insurance sector admitted to talks.
Resolution, which has seven million customers after buying up various closed life funds including those of Birmingham-based Britannic, said it was in "very early discussions" with a number of parties concerning a range of options, including an offer for the company.
Shares in Resolution – an FTSE 100 stock – rose by four per cent while the Pru and Standard Life were also ahead as investors eyed consolidation in the sector.
A report at the weekend said Resolution, which linked up with Britannic in September 2005, was looking to merge with a larger rival and that it had met several life insurers in the past two months.
The company has grown at rapid pace following several deals to buy closed funds, such as most recently the acquisition of Abbey National businesses, including Scottish Mutual, Scottish Provident and Abbey National Life.
However, the deals have inflated values in the sector and made it harder for Resolution to complete tie-ups. It has been claimed that the Pru and Scottish Widows, which is owned by Lloyds TSB, have rebuffed approaches to sell their closed life fund businesses in recent months.
In a separate development yesterday, Cheshire-based engineering group Amec said it had blocked a takeover after claiming the proposal "undervalued the company and its prospects".
The group, which is well placed to land contracts linked to the 2012 Olympics and the next generation of nuclear power stations, received a joint approach from investment groups Texas Pacific and First Reserve Corporation.
The pair said they had been denied the chance to carry out due diligence, while Amec later said it had unanimously rejected the terms of a proposed deal.
The value of the conditional takeover was not disclosed, although analysts suggested Amec could be worth about 450p a share, or #1.5 billion.
Amec, which employs some 500 people in the Midlands at Birmingham, Stratford and Leicester, has now spurned at least two approaches, following a merger proposal from Australian mining and infrastructure group Downer EDI in the summer.
Downer, which had wanted to create a "truly global services business", was also told its proposal undervalued the company.
Charlie Cottam, an analyst at Panmure Gordon stockbrokers, said Amec could attract other bidders.
He added: "While Australian company Downer seems to have proposed a merger, other financial and trade buyers should be able to make a good investment after a 450p bid."
Amec is in the grips of a restructuring effort after selling its French infrastructure arm for around #670 million in May.
It wants to separate its core energy and process management operations from its construction business, which recently racked up half-year losses of #20 million.
While revenues in construction rose by seven per cent to #577.6 million – helped by increased activity on contracts such as the building of Heathrow Terminal 5 – losses widened by 61 per cent as a result of a poor performance on a number of contracts and under-recovery of overheads.
The Amec bid approach highlights the attraction of the infrastructure sector, following the #1 billion bidding war for PFI specialist John Laing.
Fund manager Henderson made an improved offer on Friday for John Laing after being outbid by Germany’s Allianz last month.
Shares in Amec closed up 15.25p at 415p. Shares in Resolution closed up 32.5p at 667.5p.