At the weekend the board of Bradford & Bingley decided it could not recommend to shareholders Resolution's proposal to take control of the company.

Yesterday the market took a rather different view, driving up B&B's share price by 17 per cent. The reaction makes the company's instant dismissal of Resolution's approach look even more hasty.

But after so many missteps, B&B's board finally appears to have seen the light and last night the company's adviser, Goldman Sachs, was talking to Resolution about a revised proposal.

There remain plenty of question marks over the plan. For a start, Resolution is short of banking experience. But it can buy that in.

Resolution has the backing of only four of B&B's institutions so far. Judging by the initial reaction yesterday, others will follow.

Resolution will need the Takeover Panel to allow it to buy more than 30 per cent of B&B's shares without making an offer for the rest. If shareholders vote for it, that should be a formality.

Some observers question whether there might be regulatory problems. The FSA was closely involved in the controversial move to restructure B&B's fundraising plan after its trading deteriorated. It blessed the proposed investment by TPG and the cut in the rights issue price.

But it is very hard to see why the FSA could object to B&B getting its money from an investment group backed by its biggest shareholders instead. The fact that some investors are prepared to pay more for shares in B&B than TPG can only be good news for the sector.

People close to TPG mutter about the destabilising effect Resolution's move will have. It could certainly undermine TPG's position. It is less clear that it will destabilise B&B, which is certain to get its money soon, one way or another.

For B&B's one million private shareholders, much will depend on the terms. Resolution's initial approach was to buy shares at 72p, compared with the 55p for the rights issue and TPG investment.

At 72p, it would be a slight premium to the market price before Resolution's plan was revealed. That should deal with concern about private shareholders being diluted since they would not suffer any theoretical loss of value. But B&B also wants private investors to be given the right to buy the new shares on the same terms through a clawback, a point Resolution has indicated it is happy to concede.

B&B and Goldman could still argue that shareholders would be giving away control without a significant takeover premium, whereas TPG would be getting only 23 per cent.

In which case B&B should work with Resolution to get a better deal, and even if it still feels it cannot recommend it at least give shareholders the chance to decide.

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