LONDON (Dow Jones)--The acquisition of HHG PLC (HHG.LN) that looked set for completion has been thrown into turmoil as the takeover battle for closed-book life insurance businesses in the U.K. races ahead. HHG said Thursday it has been approached by Resolution Life and could receive a bid from the privately held closed-book consolidator, despite a previously disclosed argeement to sell its closed-life insurance business for GBP1.03 billion to Life Company Investor Group, a consortium of private-equity groups led by U.K. entrepreneur Hugh Osmond. If Resolution were to table a successful bid for HHG, it would be the second time the company had outmaneuvered Osmond, having won the race to acquire Royal & Sun Alliance's closed U.K. life insurance business for GBP850 million in September last year. HHG, Resolution Life and the Osmond-led LCIG all declined to comment. HHG's share price has bounced significantly since Jan. 20, when the latest round of sector mergers began, increasing 22% to 71.5 pence as of 1521 GMT. In Thursday's trading, the shares were up 5.75 pence, or 8.75%. HHG has a market capitalization of about GBP1.7 billion. HHG has said it would return to its shareholders some GBP850 million of the proceeds from the sale to LGIC of its closed-book subsidiary, called Life Services. The unit has more than GBP27 billion in policyholder assets. Shareholders are to vote on the sale at an extraordinary general meeting Feb. 21. If they approve, the only remaining obstacle would be regulatory approval from the U.K. Financial Services Authority, probably in early March. Osmond's offer works out to between 67 and 74 pence for every pound of embedded value of the HHG business, a slightly wider price than the 75% of embedded value that has been the benchmark used in other acquisitions. Resolution Life, fronted by insurance stalwart Clive Cowdery, has paid about 75% of embedded value in the two deals it has completed to date - R&SA and the GBP205 million acquisition of Swiss Life's closed book in December. Analysts say an offer from Resolution Life for the HHG business could lead to a bidding war, with the eventual victor paying over the odds for the prize. "There has been a lot of speculation about other potential bidders - it could end up fetching a hefty premium if a bidding war takes off," said Katrina Preston, an analyst with Bridgewell Securities. The HHG business is made up a number of closed businesses, including Pearl Assurance PLC, NPI Ltd., NPI Life Ltd. and London Life Ltd., all of which were formally owned by Australian financial services group AMP Ltd. until it pulled out of the U.K. market in 2003. HHG has a stock market listing in both the U.K. and Australia and still has some 800,000 small Australian individual shareholders left over from the AMP involvement.
