The battle for Resolution reopened after the life insurance group's board withdrew a recommendation for a bid by Standard Life. Resolution is likely to ask both Standard Life and its competitor Pearl, to raise their bids.
Standard Life offered £4.9bn for Resolution, or 716p a share, in cash and shares on Friday. The offer was immediately trumped by a 720p-a-share offer in cash from Pearl.
Resolution decided at a board meeting that it could not continue to recommend Standard Life's offer, because Pearl also revealed it had snapped up a further 8pc of Resolution's shares, taking its total holding to 24.2pc.
Pearl's holding means it can effectively block Standard Life's offer, which is structured as a scheme of arrangement and requires the support of 75pc of shareholders.
Standard Life could take control of Resolution with a simple majority of shares, but its plans rest on being able to sell the closed book assets to Swiss Re for £2.35bn, which it may not be able to do without 75 per cent of shares, an almost impossible requirement given Pearl's stake.
The Edinburgh insurer is discussing with advisors a way of structuring a bid which would allow it to pursue plans with a simple majority. Pearl are claiming the Standard Life bid is dead in the water, but Standard Life has not conceded its rival's stake is insurmountable.
It has been a bitter battle for Resolution, which includes closed life insurance business known as zombie funds, as well as asset management and new business.