Pearl Assurance has played a blinder in what has become one of the most hard-fought takeover battles in the insurance sector.

A day after Resolution and Friends Provident unveiled their £8.4 billion merger agreement in late July, Pearl began to accumulate Resolution shares, paying as much as 650p apiece to take its holding to 16.5 per cent.

As the insurer’s largest shareholder, it quickly went public with its opposition to the deal on strategic grounds. A clearly irked Resolution had to change the terms of its Friends merger agreement to see off Pearl’s threat to build a blocking stake.

Pearl said from the beginning that it wanted to discuss “an alternative proposal” with Resolution’s management, but managed to avoid going into explicit detail for months. Meanwhile, it chipped away at the Friends deal and lost nothing by having a low-ball 660p-a-share cash bid rejected out of hand.

Now, Pearl has done it again. On Friday, it was busy hoovering up a further tranche of Resolution shares even as Clive Cowdery, the chairman, was unveiling an agreed merger with Standard Life worth 715p, or £4.9 billion. Less than an hour later, Pearl trumped the bid with 720p in cash and unveiled a blocking stake of a quarter of Resolution’s equity. Pearl has promised to restrict Standard Life’s actions if the Edinburgh-based insurer presses ahead with the terms as they stand.

Pearl claims that even with its deal structure amended to require approval from only 50 per cent of Resolution’s shareholder base, Standard would be severely restricted in what it could do after a takeover. Pearl would make life very difficult, blocking special resolutions, including a planned release of £2.3 billion of cash from the bid partner Swiss Re.

These are high-stakes tactics. All the pressure is on Standard Life. Few questions are being asked of Pearl’s ability to fund a higher offer and whether its bankers would balk if it has to go hostile. But Standard Life is no fool. It has been waiting for its moment to move on a big deal. It would have been briefed to expect such a play by Mr Osmond’s “zombie” fund. Resolution will be asking both sides to up the ante on price. It remains to be seen how deep Pearl can dive.

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