Resolution last night rejected a 660p a share all-cash pre-conditional takeover bid from Pearl, Hugh Osmond’s arch rival “zombie” fund, and vowed to press ahead with its controversial merger with Friends Provident.

In response, a “disappointed” Pearl renewed its assault on the logic of the £8.4 billion “Friends Financial” deal and suggested that Resolution’s investors shared its view.

Resolution shares closed 5p lower at 680p, before details of the rejected offer emerged.

Pearl also revealed that it had struck a £1.25 billion deal with Royal London that would see the mutual firm pay cash for Resolution’s small open book of life business if a deal was successful.

Pearl said: “It is difficult to see that our possible offer undervalues Resolution. This is the time for further discussion.” It said the deal was worth just over 669p if a proposed Resolution dividend was taken into account.

Earlier, Clive Cowdery, Resolution’s executive chairman, dismissed Pearl’s widely trailed bid, worth £4.5 billion, saying it “significantly undervalues Resolution and its prospects”.

Resolution said it still believed that the Friends deal offered better value. However, Mr Cowdery has indicated his willingness to explore an alternative proposal if it comes at a premium to the Friends merger. Fresh talks with Pearl are thought likely.

Pearl is Resolution’s largest shareholder with a 16.5 per cent stake. It indicated its interest in a possible all-cash offer in July, when the £8.4 billion Friends tie-up was unveiled. It said then that it failed to see the logic of the deal, in that it involved open life funds.

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