Liberty Acquisition Holdings (International) Company (LIACS.AE) said Monday it has agreed to acquire U.K. insurer Pearl Group in a move that could create a GBP2.3 billion London-listed insurance business targeting investment opportunities created by the financial crisis.

The deal values Pearl at around GBP1.6 billion and Liberty will inject up to EUR600 million into the company once the acquisition is completed.

The new business will keep the Pearl name and could rekindle old rivalries between Pearl shareholder Hugh Osmond and U.K. entrepreneur Clive Cowdery. Last year Cowdery launched Resolution Ltd. (RSL.LN), a business intended to acquire and restructure financial companies in the U.K. and western Europe.

Liberty said in its statement Monday that opportunities in the sector "are unequaled in several decades."

Cowdery was formerly chairman of Resolution PLC, which Pearl bought for GBP5 billion two years ago and which contributed to its troublesome GBP3 billion debt burden.

The new Pearl will keep Liberty's Euronext stock listing but will seek a primary listing on the London Stock Exchange by the end of this year.

At 1323 GMT, Liberty shares were up 1% at EUR9.80.

A market source said that Pearl's expected LSE market capitalization could place it among the U.K's top eight insurance companies. Prudential PLC (PRU.LN) is the U.K.'s biggest insurance company by market value at around GBP10 billion, followed by Aviva PLC (AV.LN) with about GBP9 billion. Friends Provident PLC (FP.LN), a FTSE100 insurer, has a market capitalization of around GBP1.54 billion.

Liberty, which is a special purpose acquisition vehicle, or SPAC, a publicly quoted company set up specifically to raise cash to fund purchases, will acquire 100% of Pearl by issuing 52.8 million new ordinary shares to Pearl's shareholders and other stakeholders, and may issue up to a further 35 million new ordinary shares by way of earn-out consideration.

The combined effect of the cash injection and balance sheet restructuring, which will reduce liabilities by about GBP560 million, will strengthen Pearl's balance sheet by over GBP1 billion.

At completion, Pearl Group is expected to have a pro forma gross embedded value of approximately GBP5.2 billion and bank debt and other liabilities of GBP2.9 billion. Embedded value is often used by insurance companies. It combines net asset value and the present value of future business.

Liberty said: "Pearl Group is a uniquely attractive opportunity, available at a compelling valuation." The company added that Pearl is well managed and well governed and it should have strong potential long-term cash flow.

Pearl will continue to be led by its existing Chief Executive Jonathan Moss and Chief Financial Officer, Simon Smith, but after completion of the transaction, a new board will be formed with a new chairman and a majority of independent directors.

Liberty is not related to Liberty International PLC (LII.LN), the real-estate investment trust.

Company Web site: www.libertyacquisitionholdingsinternational.com

By Anita Likus, Dow Jones Newswires; +44 20 7842 9407; anita.likus@dowjones.com

(Vladimir Guevarra and Digby Larner contributed to this item.)
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