After an improved offer of £1.86 billion in shares and cash from Cowdery's Resolution investment vehicle, insurance group Friends Provident has agreed to re-enter talks for a prospective merger with Resolution.

With Friends Provident rejecting the last month initial offer of 0.82 Resolution shares for each of the insurer's shares, the sweetened offer now stands at 0.9 new Resolution shares for each of the shares of Friends Provident, which has nearly 740,000 retail investors. The new offer values the insurance group at approximately £1.86bn - thereby marking a 13.3 per cent premium to its closing price on Friday.

As per the revised offer, Resolution will now make available £500 million cash alternative for the first 2,500 shares, which are held by those small investors in Friends Provident who do not desire exchanging their shares for the new Resolution group shares.

In a Monday statement about the revised Resolution offer, the insurance group, chaired by Sir Adrian Montague, said: "The board of Friends Provident believes that this revised proposal has been sufficiently improved to justify entering into discussions with Resolution with a view to recommending its proposal."

However, in its new offer, Resolution has not reiterated its earlier reassurance that, after the takeover, Friends shareholders would be paid the same 2009 dividend that they would have received otherwise - though the assurance would likely be part of the final deal!