Equitable warns bidders that highest offer may not win

Equitable Life, the beleaguered life company forced to put itself up for sale following a £1.5bn defeat in the House of Lords, yesterday warned bidders that the highest offer for its business will not necessarily win.

Equitable Life, the beleaguered life company forced to put itself up for sale following a £1.5bn defeat in the House of Lords, yesterday warned bidders that the highest offer for its business will not necessarily win.

The news came as Equitable said the number of approaches for the business, which is valued at about £5bn, has been in "double figures", with strong interest from American and European as well as UK companies.

According to weekend reports, GE Capital, the financial services arm of the US conglomerate General Electric, has joined the Dutch insurer Aegon, as well as Axa, Zurich and Allianz as interested foreign bidders. In Britain, Abbey National and Prudential have registered an interest. The bidders will receive a memorandum of sale this week, sent out by Schroder Salomon Barney, the investment bank handling the sale.

Analysts expect competition for Equitable, one of the most profitable businesses in the life insurance sector, to be fierce.

However, an Equitable insider said yesterday that the board would not necessarily back the highest headline amount for its business when it recommends an offer, ahead of a vote by members on the proposed deal next year. In contrast, offers that guarantee to keep charges low will be viewed favourably, he said. "There will be many issues to consider. One bid may be a very high headline offer, but in the small print it may say that the company intends to quadruple charges and introduce heavy transfer penalties," he said.

While high charges would be very unpopular with members, Equitable said yesterday it will not necessarily push any offers which include the highly popular move to pay out windfalls. The company said it may back offers that invest in the long-term value of the fund over arrangements to pay out a minimum windfall of £500.

Equitable was forced to surrender its independence after the House of Lords ruled that it must find £1.5bn to increase payouts to its guaranteed annuity holders. The company, which keeps very little of its £33bn of capital in reserve, decided to put itself up for sale to generate the extra funds.