Pearl Assurance’s £5 billion takeover of Resolution may take a further three months, after the closed life fund consolidator continued talks with the City watchdog that must sign-off the deal.

Resolution, a rival consolidator, said last Monday that the takeover would be complete by mid-march. But in a statement yesterday, the company said that Pearl had extended its takeover timetable to allow it to finalise its discussions with the Financial Services Authority (FSA).

The FSA waded into the deal, initially agreed in mid-November, when Pearl applied to change control of Resolution. After examining the application, the FSA questioned whether Resolution’s policyholders would be disadvantaged by the timing of Pearl's plans to free capital from the Resolution life funds.

The FSA has to approve the change of ownership of Resolution for the acquisition to be completed and the regulator is obliged to protect the interests of policyholders.

Yesterday, Resolution said that it was continuing to provide Pearl with the information it needed to push through a revised change of control application.

The consolidator said that discussions on the original application had been due to finish within three weeks, putting the deal completion date at mid-March, but that the watchdog now had an additional three months to consider Pearl’s revised application.

“[The FSA] has indicated that it would in practice seek to conclude its change of control process in a shorter period,” Resolution said.

Sources close to Resolution said that the company remained keen to get the deal done and was providing Pearl with as much information as it required. But Pearl sources said that Resolution has been slow to provide information needed for the original change of control application, necessitating a revised application.

It was unclear how much capital Pearl wants from the fund and Pearl declined to comment on the specifics of its plans. When policies in funds mature, capital is usually released to shareholders.

Sources close to Pearl said that the capital was not needed to fund the acquisition. Pearl has agreed to pay 720p a share in cash for Resolution. The FSA can approve the terms as previously agreed, impose conditions on either party or veto the deal altogether.

Resolution had already agreed to one delay in completing the acquisition while Pearl and its partner, Royal London, agreed on how to divide Resolution's assets.

Resolution had originally agreed an £8.5billion merger with Friends Provident in July, when Pearl emerged as Resolution's largest shareholder and claimed that it was implacably opposed to the deal.

Standard Life briefly broke up the agreed deal with Friends before Pearl won the day with its cash offer at 720p.

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