ALMOST five years ago, Hugh Osmond and Clive Cowdery would have been the most unlikely of rivals.

Osmond, the pizza-to-pubs entrepreneur, was searching for his next money-spinner. Cowdery was an insurance-industry veteran with grand ambitions to make tens of millions of pounds by buying up so-called “closed funds”, life-insurance businesses no longer writing new policies.

Since then, the rivals have gobbled up closed funds in a multi-billion pound spree. Osmond, who runs Pearl Group, has seen his fortune surge to £320m. Cowdery is worth more than £170m and his company Resolution has grown from nothing to becoming a member of the FTSE 100.

Now the two are embroiled in a final showdown in a high-stakes bidding war over who will buy Resolution.

Osmond, backed by insurer Royal London, is pitched against not just Cowdery, but Sandy Crombie, chief executive of Standard Life, and its partner Swiss Re. The battle has already led to casualties after Resolution ditched its £8 billion merger with Friends Provident nine days ago.

The battle had been simmering for months. Over the past 18 months, Resolution held on-off talks with Standard Life, Friends and Prudential. By July, it opted for a merger with Friends.

Pearl struck back, snapping up a 16% stake in Resolution and opposing the deal. Standard began due diligence on Resolution, but waited in the wings.

In the past two weeks, the gloves have come off as the battle has descended into a war of words and a clash of egos. Reputations are on the line.

Nine days ago, Standard seemed to gain the upper hand briefly when Resolution recommended a 715p-per-share cash and shares bid. Within an hour, Pearl countered with a 720p-per-share bid worth £4.94 billion and a share raid that raised its stake to 22%. Hours later the stake had reached 24.18%, allowing Osmond to block the Standard deal. Last Monday, Resolution’s board had no choice but to withdraw its support for Standard’s bid.

Osmond appears to have outmanoeuvred his rival and, critics say, left Standard looking utterly inept. Even if the £6 billion Edin-burgh-based insurer decides to restructure its bid as an offer requiring just 50% shareholder approval, there are problems. Pearl claims it can block Standard’s plan to sell on some of the closed funds to Swiss Re for £2.3 billion and necessary changes to the group’s tax and capital structure, since these would all need the backing of 75% of the shareholders.

So far, both sides have been guilty of misreading each other.

Pearl is thought to have been confident Standard would not make a bid after talks between the two sides about a joint offer collapsed over price. Critics argue that Standard’s Crombie and chairman Gerry Grimstone were too ponderous, having to plead with the Takeover Panel to extend the bid deadline. Worse still, Crombie appears to have underestimated Osmond’s blocking tactics.

Standard and its investment-bank advisers, Merrill Lynch and UBS, also suffered the embarrassment of being rebuked by the panel. Remarkably, Standard was forced to clarify its position three times in one day after it breached rules about indicating it might improve its offer.

“Under the status quo, Standard Life is going to struggle to get Resolution,” said Bruno Paul-son, an analyst at Sanford Bern-stein. “Given Pearl’s stake, Standard is going to have to buy its consent. The question is how far Standard can afford to go. And institutional shareholders are not really happy even at the current offer level.”

But even if Standard seems to be in a bind, it is still fighting and should not be written off. The board is understood to believe it has options.

So far, Standard has been trying to convince investors that its share price is undervalued – trading at 272Äp, close to the embedded value (a measure of the worth of policies) – and should be rerated, a move that would raise the value of its bid.

It argues that its deal with Resolution offers considerable growth prospects as well as £71m a year in cost savings by 2010, plus £250m a year from merging different life funds from next year. Standard would become one of the largest players in the British life and pensions market, snap up a 6% share of the protection market, get access to 2m more customers and boost funds under management at its investment arm by £50 billion to £191 billion.

Convincing investors will be tough. Many had bought into Standard Life’s growth story, largely driven by booming sales of self-invested personal pensions (Sipps). To many, the Resolution bid is a strategic u-turn.

Crombie counters that a deal with Resolution complements its growth strategy by giving it a better position in the cutthroat protection market and getting access to more customers.

Others disagree on the moti-vation. “Standard had to do this because it feared being taken over,” said Oriel Securities analyst Roman Cizdyn. “It is a chance to leapfrog the competition. But they could have continued on the organic-growth route. That is a big issue for shareholders.”

There have also been doubts about growth. Though third-quarter figures showed a 27% year-on-year rise in life and pension new business, Sipp sales slumped by 22% on the previous quarter as rivals ratcheted up the competition.

Pearl has trashed Standard’s record, accusing it of being overexposed to low-margin pensions business, and hit by huge numbers of policies being cashed in. It has also slated the deal as “ill-conceived with minimal strategic logic”, arguing that Standard is overpaying for the protection business and buying investment funds with paltry margins.

Stung, Standard has labelled Pearl’s rhetoric as “self-serving and potentially misleading”.

If Standard is to buy off Osmond it must make a compelling, all-cash offer. One suggestion is to sell the Canadian business, worth about £1.4 billion, though Standard has so far ruled this out. More likely is a share placing, but this could hammer its share price.

As blows are traded, Cowdery has not emerged unscathed. Pearl has been pressing for a recommendation and there are dark mutterings in the City that Cowdery’s alleged battle of egos with Osmond means he is loth to see his rival succeed – a suggestion Resolution insiders deny.

Resolution’s independence is over, but Cowdery and the board have arguably been skilful in creating a tense auction – a recommendation, albeit short-lived, was probably the price to get Standard to the starting line.

This is a battle nobody wants to lose. Whoever does will face huge consequences. Osmond would miss out on the ultimate closed-fund consolidation deal. Meanwhile, Crombie’s reputation as the man who rescued and floated an ailing Standard could be tarnished – and potentially thwart his chances of staying beyond his 60th birthday in 2009.

The stakes could not be higher.

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