SHARES in Saints sponsor Friends Provident sank six per cent after it said it planned to issue new stock to fund a merger of its Isis asset management arm with Eureko's F&C.

The shares fell 8.25p to 137.5p after insurer Friends said it intended to place 172.4 million new shares - about ten per cent of its existing share capital - to bankroll the deal.

It is expected to create the UK's fourth largest asset management company with £120 billion of funds under management.

Friends Provident, which pays Southampton Football Club £1m a year in sponsorship rights, currently has a 67 per cent stake in London-based Isis, while Dutch-based insurer Eureko owns 100 per cent of asset manager F&C, also based in London.

Friends Provident, which has nearly one million shareholders and 2.5 million policyholders, employs 1,060 workers at its regional offices in Salisbury.

If investors approve the merger, Friends will hold 51 per cent of the enlarged group, which will be known under the F&C branding.

The group said it expected the merger to produce annual savings before tax of £33m, achievable by early 2006.

A spokesman said Isis and F&C employ a total of about 1,000 people, the majority of which are in London.

"There will be job implications, but there is no detail on that yet," he said.

Friends said the move was "consistent with its stated ambition to be a major player in its two core businesses of UK life and pensions and asset management and fulfils its ambition to be a top five UK asset manager".

Friends' chief executive Keith Satchell, who earns £732,000 and is a familiar figure at the Saints' stadium, which is named after the company, said: "The combination should create significant value for our shareholders and we are committed to retaining majority ownership of the enlarged group."

In its statement Friends said new business to the end of June was up on the same period last year.