Insurance giant Prudential is meeting key shareholders to drum up support for its $35.5bn takeover of AIA, the Asian division of US insurer AIG, and the $21bn rights issue needed to fund it. The deal is a record for the insurance sector – the May rights issue will be Britain’s largest ever. Last week, Prudential announced it would bring forward its planned Hong Kong listing to April so that its shares will trade there before the British rights issue.
What the commentators said
Pru is “feeling the heat”, said Hester Plumridge in The Wall Street Journal. The shares slid by 15% last week, not least because investors are unhappy at the high cost of funding the deal. Bringing the Hong Kong initial public offering forward is a sensible way to boost support for the rights issue, as it widens the pool of investors who can take part in it.
But chief executive Tidjane Thiam still has “a massive job” ahead to push the deal through by convincing 75% of the shareholders to approve it, said Damian Reece in The Daily Telegraph. One controversial issue is the price. If there is “a scintilla of doubt about the growth profile” of AIG’s assets, some shareholders will baulk. Execution risk is also a factor, especially given Thiam’s relative inexperience.
“He’s only been there 20 minutes. We’ve had ten years of strategic disasters from his predecessors,” a senior fund manager told David Wighton in The Times. That’s another reason the Pru’s pitch, which boils down to ‘trust me’, hasn’t gone down too well, said Wighton. With little detailed information so far, no wonder the atmosphere has been “a bit chilly”.
PRU: 521p; 12m change 151%