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CVC shelves takeover talks for zombie fund manager Phoenix

10 Feb 2012

Phoenix Group Holdings, the UK’s biggest owner of old life assurance and pension policies, has ended takeover talks with London-based private equity firm CVC Capital Partners after failing to agree on a price.

“Whilst the board is obliged to consider credible approaches, the terms proposed by CVC did not reflect our view of the full value of Phoenix and its stable, long-term cash flows,” Phoenix CEO Clive Bannister said in a statement.

“As a result, we have mutually decided to terminate these discussions. Phoenix continues to focus fully on our business, customers, shareholders and staff to maximise the potential of our powerful consolidation platform.”

The company has also confirmed that it is not in discussions with any other party regarding a potential offer.

Phoenix rejected a £1.2bn all-cash bid from rival insurer Resolution in November last year after also failing to agree on a price. CVC was thought to be the last remaining bidder for Phoenix, after reinsurer Swiss Re also failed to agree on a valuation for the company.

Listed on the LSE, Phoenix owns nearly £70bn of so-called ‘zombie funds’ for more than six million customers, sold by UK insurance heavyweights such as London Life, National Provident and Scottish Mutual.

The business has been weighed down by sizeable debts accrued following the £5bn takeover of a pool of closed life funds, which it acquired from Resolution in 2007.

Shares in Phoenix, which is currently valued at around £932m on the LSE, fell by almost six per cent to 536 pence during early hours trading this morning.

CVC’s interest reflects a growing interest from buy-out firms for zombie funds. In August last year European buy-out firm Cinven bought UK-based Guardian Life Insurance from Dutch pensions giant Aegon for £275m, beating private equity firm Apollo Global Management and Swiss Re to the post.

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