Eureko set to bid for Equitable Life

Eureko, THE pan-European insurance group which includes Friends Provident of the UK, is preparing to enter the bidding for Equitable Life, the life insurance mutual which was forced to put itself up for sale in July.

Eureko, THE pan-European insurance group which includes Friends Provident of the UK, is preparing to enter the bidding for Equitable Life, the life insurance mutual which was forced to put itself up for sale in July.

The Dutch-based company, which announced plans for an ambitious initial public offering (IPO) in July, is working with Chase, its bankers, on a proposal and is expected to decide later this week whether to make a formal offer.

News of its interest will come as a relief to Equitable. It has been struggling to drum up interest among bidders willing to stump up some £3.5bn to £5bn to plug the black hole left by the House of Lords ruling in July that it had failed to meet obligations to 90,000 holders of guaranteed annuity policies.

CGNU, the life insurance group which was one of the two bidders on the short list drawn up by Equitable's advisors Schroders Salamon Smiths Barney last month, is having cold feet and is unlikely to table a final offer. That would have left the Prudential, which has long been thought of as the only bidder and therefore able to name its price.

Eureko looked seriously at bidding for Guardian Royal Exchange, the general insurance group, two years ago. But it was unable to execute a bid because AXA, which won the bidding, had already locked up Liberty Life, which was the only creditable acquirer for GRE's US businesses which accounted for around a third of turnover.

However, bankers say Eureko has changed since then. At that stage it was a loose collection of eight mainly mutual insurers. This year the business has been integrated and put on a more sound footing through the merger of Achmea, the Dutch insurer and the insurance arm of Banco, Commercial Portugues, the Portuguese bank. It is unclear at this stage if Friends Provident, which would have bank-rolled the GRE bid, will be involved with any move for Equitable.

Friends is preparing a £5bn flotation next year and its recent moves have suggested that it may be willing to step aside leaving room for Equitable Life to become Eureko's main UK partner.

Unlike the Pru, which would close down Equitable Life's life fund and write all new business into its own life fund, Eureko would simply repair Equitable Life's damaged life fund and refloat the business.

Equitable is expecting final offers by the end of this month.