JC Flowers, the US private equity firm, has made a 175p per share informal offer for Friends Provident and is expected to update the market this week on its approach to the troubled UK insurer.

Ravi Sinha, who runs JC Flowers’ operations in Europe, wrote to Friends Provident’s board shortly before Christmas in an attempt to open talks between the two companies.

Mr Sinha is thought to have told Friends that JC Flowers was prepared to put together a formal offer at the 175p-per-share level. It is not known what response he received from the 176-year-old insurer but sources said that the company was likely to be looking for offers above 200p per share. JC Flowers last week built up a 1.8 per cent stake in Friends but is thought to be waiting for the outcome of a strategic review by the insurer before deciding its next move. Friends is due to reveal the results of the review of its operations on January 31, which could lead to a break-up of the business.

Sources said last night that JC Flowers was unlikely to raise its offer, which values the company at about £4.1 billion. Shares in Friends closed down 2.6p at 152.6p each on Friday, making the company worth £3.5 billion.

The private equity firm specialises in financial services investments and recently pulled out of the bidding war for Northern Rock after failing to match the expectations of the Government, which is owed an estimated £26 billion by Northern Rock, with the funding available for a deal.

JC Flowers was thought to be interested in making an offer for Friends in May last year, possibly in partnership with AXA, the French insurer. The speculation, which put the bid at about 250p per share, sent Friends’ shares soaring but did not come to fruition.

Friends started the strategic review after its agreed £8.7 billion merger with Resolution, the closed life fund consolidator, was scuppered last November by Resolution’s decision to sell itself to Pearl Group, the consolidator owned by Hugh Osmond. Friends admitted at the time that it could not continue in its current form.

Philip Moore, Friends’ chief executive, was ousted by the board soon after the collapse of the Resolution deal and the company’s search for a chief executive continues. Trevor Matthews, the head of Standard Life’s UK business, is believed to have turned down an offer to run Friends.

The strategic review, which is being overseen by Goldman Sachs, the investment bank, is expected to lead to the sale or demerger of Friends’ 53 per cent stake in F&C Asset Management.

Bankers said last night that JC Flowers may consider teaming up with a company with more experience in insurance and asset management in order to split up the company.

Friends has a successful Benelux wealth management arm, Lombard, and an offshore investment business in the Isle of Man. It also has a substantial insurance business in Asia. Closed life fund consolidators such as Swiss Re are likely to be interested in Friends’s books of policies.

“Flowers looks at every single financial services situation in Europe so it makes sense that they’d be taking an interest in this,” a source said.

Goldman Sachs is believed to have sounded out potential buyers of Friends during the review. Friends Provident and JC Flowers yesterday declined to comment.

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