British insurer Friends Provident has proposed a takeover of buy-out firm Resolution in an all-shares deal, turning the tables on Resolution which itself is looking to buy Friends Provident.

Four days ago, Friends rejected a takeover bid from Resolution as 'wholly inadequate'.

'The board of Friends Provident Group has today sent to the chairman of Resolution Limited a letter setting out a proposed structure for effecting a possible combination of the two groups,' Friends said in a statement to the London Stock Exchange.

But it added that a tie-up could be agreed only on terms that were 'fair to both sets of shareholders'.

Under the plan, Friends Provident would become the holding company of the combined group, with Resolution shareholders exchanging their shares in Resolution for new shares in Friends Provident.