Flowers shows hand with bid, unimpressed Friends rejects

Five minutes into trading, shares were up 4.75% or 5.7p at 125.8p. Half an hour into morning trading Friends was up 5p or 4.2% at 125.1p.

Friends Provident's board said the £3.6 billion offer 'significantly undervalued' the company adding that under the terms of the proposal, the offer price would be reduced if Friends paid out its 2007 final dividend of 5.3p per share.

The UK insurer said in a statement that the JC Flowers approach 'significantly undervalues Friends Provident and its prospects and does not represent a basis for discussion.'

The group said it would continue to press on with its recently introduced strategic overhaul.

Flowers has built a 2.7% stake it the company and is rumoured to have initiated talks with a number of banks  to finance the deal amid reports that it was looking for around £1.5 billion from four banks and a further £300 million from smaller institutions.