LONDON (ShareCast) - (ShareCast News) - Phoenix Group Holdings has confirmed rumours that it has begun non-exclusive talks about acquiring Guardian Financial Services.
The FTSE 250-listed closed life and pension fund consolidator said in a statement Thursday that it was "evaluating" the smaller rival as part of an on-going sale process.

It followed an announcement in August that the company believed there were a number of potential acquisition and consolidation opportunities in the UK closed life sector.

Sky News reports a takeover of Guardian would bring in £1.7bn of pension annuity assets that it was forced to sell in an attempt to slash its debt-pile.

The deal would create a £70bn asset manager.

Discussions for the purchase are on a non-exclusive basis - Swiss Re's Admin Re closed life business and private equity group CVC Capital Partners are also said to be looking at a potential purchase.

"Having secured an investment grade rating earlier this year, the group is well positioned to take advantage of the consolidation opportunities in its sector," Phoenix added.

Shore Capital's Eamonn Flanagan isn't surprised by the news.

"We view [Guardian Royal Exchange Group] as well managed and would represent a transformational deal for Phoenix.

"The embedded values are similar, at just under £3bn, but such a deal would likely require a capital raise from Phoenix."

But Flanagan wonders whether Guardian's owner Cinven would accept the level of discount implied in the current rating of Phoenix at around 25%, for Guardian.

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