Prudential shares buck falling FTSE in light of AIG deal fragility

International retail financial services giants Prudential (LON:PRU) has bucked a drastically declining FTSE 100 index in this morning’s trading with a share price increase of over three per cent.

Kate Neilson
shareprices.com - Tuesday, June 01, 2010

Printable version email to a friend Subscribe to shareprices.com newsfeed
Prudential's deal with AIG looks likely to collapse

Shares in the group have outperformed a heavily falling top share index in the first session of the week as BP (LON:BP), miners and banks are all dragging the FTSE 100 over two per cent down.

The Pru has joined only a handful of stocks that are having a growth in price today with the shares gaining as much as four per cent during early trading. And it is investor’s growth in confidence that a scheduled buyout of the Asian arm of US insurance giants AIG won’t go ahead that’s pushed the stock to the peak of the FTSE 100 climbers so far today.

The Pru had planned to take over AIA – a move that would have made them the biggest power in the Asian market – and had agreed to pay around $35.5bn for the business. However, analysts tagged the deal as extortionate and shareholders cringed at the thought of being expected to double their investment to fund the deal. And with company CEO Tidjane Thiam needing the backing of 75 per cent of investors for the deal to go through, insiders reported the Pru was set to come up short.

Following analyst reports that the deal was priced too high, the group has attempted to renegotiate the price with AIG with hopes it could knock ten per cent off and acquire the Asian life insurance arm for $30.38bn. However, with AIG outright refusing to back down on the initial agreement, the deal looks almost certain to fall through – potentially ending Thiam’s role as CEO and possibly resulting in the group being broken up.

The firm’s share price has risen almost four per cent, gaining over 20p, as investors look to buy in to the group now that the AIA deal looks to be off.

The other top performer on a fairly low day for the FTSE is Scottish and Southern Energy (LON:SSE). The UK’s second biggest power producer said it will not attempt to buy a stake in EDF Energy’s electricity distribution networks which would have been funded by issuing new equity.

Scottish and Southern Energy Finance Director Gregor Alexander said: “We do not need to make any acquisitions and do not need to, or plan to, issue equity to help meet these dividend targets”.

Investors reacted positively with the share price improving by 18p, more than 1.5 per cent before midday BST.

 

Latest News

Related News

FTSE 100 Latest

ValueChange
5,875.9314.33  % fall