Phoenix's £200m restructuring deal paves way for full stock market listing

Phoenix Group, the life insurer formerly known as Pearl, is on course to obtain a full listing on the London Stock Exchange after reaching a £200m agreement to simplify its capital structure. Britain's largest "zombie" insurance fund manager, which buys up insurance funds that have been closed to new business, wants to move from a secondary listing to a premium listing to raise its profile and boost its share price. It is also keen to go on a buying spree next year, which will further cut the cost of managing the insurance policies. "In due course, we believe that we will be able to take advantage of acquisition opportunities in the consolidation of the closed life sector, thereby enhancing value for our shareholders," said chief executive Jonathan Moss. The company, the brainchild of pizza and pub entrepreneur Hugh Osmond, has reached a deal to remove contingent share rights that, if approved by investors, will clear the way for the group to obtain a premium listing on 5 July. It expects to be included in the FTSE's UK indices from September. Phoenix announced today that it had agreed to buy out the contingent rights held by two of its main shareholders, by swapping nine shares for every 10 contingent rights. These entitlements promised shares in the business if the share price hit a certain level. They were issued to private equity investors Osmond and Manjit Dale's buyout firm TDR Capital to compensate them for giving up 70% of their stakes in the group as part of a restructuring a year ago, when the firm was in financial trouble and was acquired by an Amsterdam-listed vehicle. Share re-rating At today's London share price of 632.5p, up 7p, the new shares are worth about £200m and Phoenix is set to have a market value of £1bn following the capital restructuring, up from the current £840m. Phoenix hopes the premium listing will bring improved liquidity, wider analyst coverage and ultimately a re-rating of the share price, which it believes is undervalued The group has 6.5 million policyholders and £69bn of assets under management. "If we get this re-rating it will become much easier to think about acquisitions," said a spokesman. "The closure to new business of much of the traditional life sector is not good news for millions of policyholders," said Ron Sandler, the chairman, who is also nonexecutive chairman of state-owned Northern Rock . "There is a clear and growing need to consolidate such closed life funds so that they can be run off efficiently to deliver better outcomes for their policyholders. Phoenix is the natural home for these funds and the premium listing will accelerate our ability to bring this about. We believe this will benefit consumers, the industry and our shareholders." Analysts at JP Morgan Cazenove welcomed today's deal. "If passed by shareholders, it will leave a stock with a much simplified capital structure, delivering very strong cash flow." They said the likely impact is "significant share price upside potential, due to a lower share count; and over the medium term, improved liquidity in the shares and, hopefully, a consequent re-rating".