Mixed Reception for Prudential Deal
There appeared to be a difference of opinion between investors in Europe and Asia over British insurer Prudential's $35 billion deal to buy AIG's Asian unit, American International Assurance (AIA) on Monday.
Dominic Turner
shareprices.com - Tuesday, March 09, 2010
Prudential's share price plummeted to 487.5p last week after news of the AIA acquisition was announced, but recovered towards the end of the week to close at 520p on Friday; that, however, still represented a fall of nearly 20% from the peak for the year so far at 645.5p in early January. The partial recovery was largely due to buying in Asia, where the Shanghai Securities Daily described the AIA deal as "the biggest bargain in Asia". Indeed, Prudential plans to tap into demand by bringing forward its listing on the Hong Kong Stock Exchange, which it wants effective before its $20 billion right issue. In total, Prudential will pay $25 billion in cash, $8.5 billion in equity and equity-linked securities and $2 billion in preferred stock for AIA.
It was news of the size of the rights issue and concerns that Prudential was over paying for AIA that originally forced the share price down last week. Indeed, Prudential has already launched a "roadshow" to explain the deal to investors.
Meanwhile, press reports suggested that shareholders in the UK were furious that they had been excluded from sub-underwriting Prudential's right issue, the job having been given to 30 banks and sovereign wealth funds – who will receive lucrative fees – instead according to underwriters Credit Suisse, HSBC, JP Morgan. In fact, top institutional investors were threatening a revolt again Prudential Chief Executive, Tidjane Thiam, as a result of the exclusion. Shortly after midday, Prudential's share price was marginally down, losing 2p or 3.8% to 518p.
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