* Says fresh Resolution bid was "wholly inadequate"
* Says sees "no basis for further engagement"
* Resolution "considering relative attractiveness" of FP (Adds Resolution reaction, updates shares)
By Myles Neligan
LONDON, July 27 (Reuters) - British life insurer Friends Provident said on Monday it had ended talks with would-be acquirer Resolution after rejecting a fresh takeover approach from the Guernsey-based bid vehicle over the weekend.
"The board of Friends Provident sees no basis for further engagement with Resolution and has terminated discussions," Friends said in a brief statement.
Analysts said Friends' decision marked a setback for Resolution, founded last year by insurance entrepreneur Clive Cowdery to buy and restructure life insurers and asset managers.
The company raised 600 million pounds ($991.9 million) in a stock market listing last December and Friends Provident is its first formal bid target.
"Resolution's first acquisition was always going to be a tough one, but we suspect that this one is proving more difficult than Resolution imagined," Panmure Gordon analyst Barrie Cornes wrote in a research note.
"The question now is whether Resolution feels it wants to force the issue against an unwilling partner."
ALTERNATIVE OPTIONS
Resolution said Friends' move had forced it to reassess the insurer's appeal as a takeover target compared with other potential candidates.
"Resolution is considering its position on the relative attraction of Friends Provident as compared to other opportunities within the expected wider consolidation of the UK life sector," the company said.
Resolution said last week that it had held talks with the owners of an unspecified number of potential takeover targets, and had concluded that consolidation would take place within the life insurance sector in the next two years.
By 1440 GMT, Resolution shares were down 0.8 percent at 90.25 pence, while Friends Provident shares were up 0.2 percent higher at 71 pence.
Friends' withdrawal leaves Resolution with the option of launching a hostile offer, bypassing the insurer's management and appealing directly to its shareholders.
However, one major Friends Provident investor said a hostile approach was unlikely as it could alienate Friends' senior management, which Resolution wants to stay on to run the insurer and any subsequently-acquired rivals.
"I'd be surprised if they went hostile," the shareholder said.
"To go hostile would be very dangerous unless you felt sure that the operational management would be happy to stay on after the deal."
TOO LOW
Friends, Britain's sixth-biggest life insurer by market value, also said it had rejected as "wholly inadequate" a new takeover proposal from Resolution on Sunday.
Under the latest proposal, Friends shareholders would have received 0.82 Resolution shares for every Friends share they held plus 500 million pounds in cash, little changed from Resolution's initial offer two weeks ago of 0.8 shares per Friends share.
That approach was turned down as too low on July 12.
Friends has previously also raised objections to Resolution's corporate structure, saying it allows the group's senior executives to escape full shareholder scrutiny.
Resolution is based in the corporate tax haven of Guernsey, and contracts its operations out to a London-based entity whose senior executives, including Cowdery, do not sit on the Resolution board. ($1=.6049 Pound) (Additional reporting by Joel Dimmock and Victoria Howley; Editing by Rupert Winchester)