British insurer Resolution hit six-year highs in a weaker market on Monday, lifted by hopes of a 5 billion pound ($10.2 billion) bid from rival Standard Life, backed by giant Swiss Re.
Suitors have been circling Resolution, which has focused on consolidating life assurance funds closed to new business, since it agreed to merge with rival Friends Provident in July.
Unlisted competitor Pearl, also Resolution's top investor after buying up shares and derivatives, has made two unsuccessful bids, with the latest 691p-per-share cash offer rejected by Resolution's board last Friday.
Standard Life said last month it was considering a cash-and-shares offer and the former mutual is expected to make its move close to a regulatory deadline of 1600 GMT on Thursday.
An industry source said on Sunday that Standard Life and partner Swiss Re, which is due to take on some of Resolution's closed life funds in the event of a deal, were working on a bid worth around 730 pence a share, mostly in cash.
That is below earlier indications of an offer close to 750p, but is still above the current share price.
At 730p (Resolution Chairman) Clive Cowdery has to seriously consider it, Pali International analyst Marcus Barnard said. I wouldn't have thought 730p would be a knock-out, but there might be other considerations -- keeping the business intact, keeping the principles, keeping something together of the former Resolution, or further synergies.
Cowdery and several other key figures at Resolution are expected to be offered roles in the new Standard Life.
Resolution shares were up 2.1 percent at 722p by 0935 GMT, having earlier touched 730p, its highest level since Sept. 2001.
Shares in merger partner Friends Provident, however, were down 2.1 percent at 165.2p as concerns grow over the future of the original tie-up deal and with no apparent suitors circling.
Friends, Britain's smallest blue-chip life insurer, was forced to issue a statement on Friday denying reports it planned a share issue to shore up its financing if the Resolution deal failed, saying it would instead reinstate a debt programme.
Shares in Standard Life were down 2.6 percent, underperforming a 1.4 percent drop in the DJ Stoxx European index of insurance shares, as concerns persist over shares it will have to issue to fund the deal.