1st Dec 2005 07:04
Prudential PLC01 December 2005 Not for release, publication or distribution, in whole or in part, in, into or from the United States of America, Australia, Canada or Japan NOT FOR RELEASE UNTIL 07.00 GMT 1 DECEMBER 2005 RECOMMENDED OFFER BY PRUDENTIAL PLC FOR THE SHARES OF EGG PLC NOT ALREADY OWNED BY PRUDENTIAL SUMMARY The Boards of Prudential and Egg are pleased to announce the terms of arecommended Offer, to be made by Lexicon Partners on behalf of Prudential, forthe whole of the issued and to be issued shares of Egg not already owned by thePrudential Group, representing approximately 21.7 per cent. of the existingissued share capital of Egg. The Offer values the existing issued share capital of Egg at approximately £973million, a 15 per cent. premium to the market capitalisation of Egg of £845million on 30 November 2005, being the last Business Day prior to announcementof the Offer. The Board of Prudential believes that there are substantial opportunities forthe Prudential Group in the UK retail financial services market. Theacquisition of the Minority will enable Prudential and Egg to capitalise on theproduct capabilities, customer relationships and brand strengths of Prudential,M&G and Egg more effectively than would be possible within the currentshareholding structure. The Acquisition will also facilitate the realisation ofsubstantial annualised pre-tax cost savings, with £40 million expected to berealised by the end of 2007, as well as opportunities for revenue synergies. The Acquisition is expected to be earnings enhancing (both on an IFRS operatingearnings per share basis and on an EEV operating earnings per share basis) forPrudential in 2006(1)(2)(3). It is also expected to increase Prudential'scapital surplus position (on an EU Financial Conglomerates Directive solvencybasis) from the date of completion(4). The Independent Committee of the Board of Egg considers the terms of the Offerto be fair and reasonable and unanimously intends to recommend that Eggshareholders accept the Offer. THE OFFER • Under the terms of the Offer, Egg shareholders will receive 0.2237 NewPrudential Shares for each Egg Share. • Based on the closing mid-market price of a Prudential share on 30November 2005, being the last Business Day prior to announcement of the Offer,the Offer values each Egg Share at 118 pence and the entire issued share capitalof Egg at approximately £973 million. • The Offer represents a premium for Egg shareholders of 15 per cent. tothe Egg share price at the close of business on 30 November 2005, being the lastBusiness Day prior to this Announcement. • The Egg Board of Directors has established a committee of Directorswho are independent of Prudential to consider the terms of the Offer on behalfof holders of the Minority. This committee (the "Independent Committee")comprises Ronnie Baird, Pascal Cagni, Leslie Priestley, Juan Rada, Paul Grattonand Mark Nancarrow. The Independent Committee, which has been so advised byGoldman Sachs International, considers the terms of the Offer to be fair andreasonable. In providing advice to the Independent Committee, Goldman SachsInternational has taken into account the commercial assessments of the EggBoard. Accordingly, the Independent Committee unanimously intends to recommendthat Egg shareholders accept the Offer. The Independent Committee has indicatedto Prudential that they intend to give irrevocable undertakings to accept theOffer in respect of their own beneficial holdings of Egg Shares, which representapproximately 0.5 per cent. of Egg's existing issued share capital not owned byPrudential. • The Offer will be subject only to the condition that the NewPrudential Shares are admitted to listing on the Official List of the UK ListingAuthority and to trading on the London Stock Exchange's market for listedsecurities. • After the First Closing Date of the Offer, expected to be in midJanuary 2006, the Board of Egg will make an application to delist the Egg Sharesfrom the Official List and to cancel trading of Egg Shares on the London StockExchange's market for listed securities. • Prudential intends to arrange for a free share dealing facility to bemade available to Egg shareholders resident in the UK who accept the Offer andreceive their entitlement of New Prudential Shares. This dealing facility willenable them to sell up to 300 New Prudential Shares without incurring anycharges (including dealing charges and settlement charges) and to receive theproceeds of the sale in sterling. Further details of this free dealing facilitywill be provided in the Offer Document. The offer of New Prudential Shares as consideration for the Acquisition willallow Egg shareholders to participate in future value creation and dividendspayable by the enlarged Prudential Group, including the benefit of cost andrevenue synergies not otherwise available to Egg as a stand-alone business. Commenting on today's Announcement, Mark Tucker, Chief Executive of Prudential,said: "The combined strength of our Prudential UK, M&G and Egg businesses provides theGroup with significantly greater opportunities across the spectrum of personalfinancial services in the UK than is available to them operating in isolation.Whilst each business will continue to target profitable growth in its own sectorof the retail market - life and pensions, retail fund management and bankingrespectively - they will work together to develop a broader product range and amore compelling customer proposition. The Acquisition will facilitate thisprocess and the realisation of substantial cost savings, as well as providingopportunities for revenue synergies. This is an attractive financialtransaction for both Prudential and Egg shareholders alike." Commenting on today's Announcement, Paul Gratton, Chief Executive of Egg, said: "This is an exciting development for Egg and we look forward to developing theEgg brand and proposition as an integral part of Prudential's UK business.There are considerable opportunities to grow Egg's revenues and profits withinthe Prudential Group, which will give us access to nearly 2.8 million additionalmarketable customers. This deal represents an attractive outcome for Egg'sshareholders and, importantly, for our people and our customers." This summary should be read in conjunction with the full text of the attachedAnnouncement. The Offer, when made, will be subject to the Condition andFurther Terms set out in Appendix I. The sources and bases of information contained in this Announcement are set outin Appendix II and the definitions of certain expressions used in thisAnnouncement are set out in Appendix III. A presentation to analysts will be held today at 9.30AM at the office of UBS, 1Finsbury Avenue, London EC2M 2PP. ENQUIRIES For further information, contact:Prudential Media EnquiriesJon Bunn Tel: 020 7548 3559William Baldwin-Charles Tel: 020 7548 3719Joanne Doyle Tel: 020 7548 3708 Investor / Analyst EnquiriesJames Matthews Tel: 020 7548 3561Marina Novis Tel: 020 7548 3511 Lexicon Partners (financial adviser to Prudential) Tel: 020 7653 6000Andrew SibbaldOllie ClaytonLucy Garrett UBS Investment Bank (corporate broker to Prudential) Tel: 020 7568 1000Phil Shelley Egg Media EnquiriesPress Office Tel: 020 7526 2600Emma Byrne Tel: 020 7526 2565 Investor / Analyst EnquiriesKieran Coleman Tel: 020 7526 2648 Goldman Sachs International (financial adviser to Egg) Tel: 020 7774 1000Karen CookNick ReidJonathan Sorrell JP Morgan Cazenove (corporate broker to Egg) Tel: 020 7588 2828Richard LockeMike Collar Notes: 1. Supplemental reporting European Embedded Value (EEV) earnings pershare is calculated by reference to Prudential Group's operating profit based onlonger-term investment returns after tax and minority interests and beforeexceptional items, on an European Embedded Value basis. 2. IFRS operating earnings per share is calculated by reference toPrudential Group's operating profit based on longer-term investment returnsafter tax and minority interests and before exceptional items. 3. The statements that the Acquisition will be earnings enhancing donot constitute a profit forecast and should not be interpreted to mean that theearnings per share in the first full financial year following the Acquisition,or in any subsequent period, would necessarily match or be greater than thosefor the relevant preceding financial year. 4. The Group's Financial Conglomerates Directive solvency position iscalculated in accordance with the requirements of the directive and the FSA'sIntegrated Prudential Sourcebook. This Announcement does not constitute an offer or an invitation to purchase anysecurities. Lexicon Partners, which is authorised and regulated in the United Kingdom by theFinancial Services Authority, is acting for Prudential only in connection withthe Offer and no-one else and will not regard any other person as its client orbe responsible to any person other than Prudential for providing the protectionsafforded to clients of Lexicon Partners nor for providing advice in relation tothe Offer. UBS is acting for Prudential only in connection with the Offer and no-one elseand will not regard any other person as its client or be responsible to anyperson other than Prudential for providing the protections afforded to clientsof UBS nor for providing advice in relation to the Offer. Goldman Sachs International, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority, is acting exclusively for Egg andno-one else in connection with the Offer and is not advising any other personand accordingly will not be responsible to any person other than Egg forproviding the protections afforded to clients of Goldman Sachs International orfor providing advice in relation to the Offer. JP Morgan Cazenove, which is authorised and regulated in the United Kingdom bythe Financial Services Authority, is acting for Egg only in connection with theOffer and no-one else and will not regard any other person as its client or beresponsible to any person other than Egg for providing the protections affordedto clients of JP Morgan Cazenove nor for providing advice in relation to theOffer. This Announcement does not constitute, or form part of, any offer for, or anysolicitation of any offer for, securities in any jurisdiction. Any acceptanceor other response to the Offer should be made only on the basis of informationcontained in or referred to in the Offer Document and the Information Memorandumwhich Prudential intends to despatch shortly to Egg shareholders. The release, publication or distribution of this Announcement in certainjurisdictions may be restricted by law and therefore persons in suchjurisdictions into which this Announcement is released, published or distributedshould inform themselves about and observe such restrictions. The laws of the relevant jurisdiction may affect the availability of the Offerto persons not resident in the United Kingdom. Persons who are not resident inthe United Kingdom, or who are subject to the laws of any jurisdiction otherthan the United Kingdom should inform themselves about, and observe, anyapplicable requirements. Further details in relation to overseas shareholderswill be contained in the Offer Document and the Information Memorandum. The Offer will not be made, directly or indirectly, in or into, or by use of themails of, or by any means or instrumentality (including, without limitation, bymeans of telephone, fax, telex or other forms of electronic communication) ofinterstate or foreign commerce of, or any facility of a national securitiesexchange of, the United States of America, Canada, Australia or Japan and willnot be capable of acceptance by any such use, means, instrumentality orfacility. Accordingly, neither this Announcement nor the Information Memorandumnor the Offer Document nor the Form of Acceptance is being, and must not be,mailed or otherwise forwarded, transmitted, distributed or sent in, into or fromthe United States of America, Canada, Australia or Japan. Doing so may renderinvalid any purported acceptance of the Offer. All Egg shareholders or otherpersons (including nominees, trustees or custodians) who would or otherwiseintend to, or may have a contractual or legal obligation to, forward thisAnnouncement and/or the Information Memorandum and/or the Offer Document and/orthe Form of Acceptance to any jurisdiction outside the United Kingdom, shouldrefrain from doing so and seek appropriate professional advice before taking anyaction. The Offer is not an offer of securities for sale in the United States of Americaor in any jurisdiction in which such an offer is unlawful. The New PrudentialShares to be issued in connection with the Offer have not been, nor will theybe, registered under the US Securities Act of 1933, as amended, or under thesecurities laws of any state of the United States of America and may not beoffered or sold in the United States of America, absent registration or anapplicable exemption from registration. No public offering of the securitieswill be made in the United States of America. The relevant clearances have notbeen, and will not be, obtained from the securities commission of any provinceor territory of Canada; no prospectus or a prospectus equivalent has been, orwill be, lodged with, or registered by, the Australian Securities andInvestments Commission or the Japanese Ministry of Finance and the NewPrudential Shares have not been, and nor will they be, registered under oroffered in compliance with applicable securities laws of any state, province,territory or jurisdiction of Canada, Australia or Japan. Accordingly,Prudential Shares may not (unless an exemption under relevant securities laws isapplicable) be offered, sold, resold or delivered, directly or indirectly, in orinto Canada, Australia or Japan or any other jurisdiction outside the UnitedKingdom if to do so would constitute a violation of the relevant laws of, orrequire registration thereof in, such jurisdiction or to, or for the account orbenefit of, a person located in Canada, Australia or Japan. This Announcement contains a number of forward-looking statements relating toPrudential and Egg with respect to, among others, the following: financialcondition; results of operation; the businesses of Prudential and Egg; futurebenefits of the transaction; and management plans and objectives. Prudentialand Egg consider any statements that are not historical facts to be"forward-looking statements". These forward-looking statements involve a numberof risks and uncertainties that could cause actual results to differ materiallyfrom those suggested by them. Important factors that could cause actual resultsto differ materially from estimates or forecasts contained in theforward-looking statements include, among others, the following possibilities:future revenues are lower than expected; costs or difficulties relating to thecombination of the businesses of Prudential and Egg, or of other futureacquisitions, are greater than expected; expected cost savings from thetransaction or from other future acquisitions are not fully realised or notrealised within the expected time frame; competitive pressures in the industryincrease; general economic conditions or conditions affecting the relevantindustries, whether internationally or in the places Prudential and Egg dobusiness are less favourable than expected, and/or conditions in the securitiesmarket are less favourable than expected. The estimated operational cost savings and financial synergies have beencalculated on the basis of the existing cost and operating structures of thecompanies and by reference to current prices and the current regulatoryenvironment. These statements of estimated cost savings relate to futureactions and circumstances which, by their nature, involve risk, uncertaintiesand other factors. Because of this, the cost savings and financial synergiesreferred to may not be achieved, or those achieved could be materially differentfrom those estimated. These statements should not be interpreted to mean thatthe earnings per share in the first full financial year following theAcquisition, or in any subsequent period, would necessarily match or be greaterthan those for the relevant preceding financial period. Dealing Disclosure Requirements Under the provisions of Rule 8.3 of the City Code on Takeovers and Mergers, ifany person is, or becomes, "interested" (directly or indirectly) in 1% or moreof any class of "relevant securities" of Prudential or of Egg, all "dealings" inany "relevant securities" of that company (including by means of an option inrespect of, or a derivative referenced to, any such "relevant securities") mustbe publicly disclosed by no later than 3.30 pm (London time) on the Londonbusiness day following the date of the relevant transaction. This requirementwill continue until the First Closing Date. If two or more persons act togetherpursuant to an agreement or understanding, whether formal or informal, toacquire an "interest" in "relevant securities" of Prudential or Egg, they willbe deemed to be a single person for the purpose of Rule 8.3. Under the provisions of Rule 8.1 of the City Code, all "dealings" in "relevantsecurities" of Prudential or of Egg by Prudential or Egg, or by any of theirrespective "associates", must be disclosed by no later than 12.00 noon (Londontime) on the London business day following the date of the relevant transaction. A disclosure table, giving details of the companies in whose "relevantsecurities" "dealings" should be disclosed, and the number of such securities inissue, can be found on the Takeover Panel's website atwww.thetakeoverpanel.org.uk. "Interests in securities" arise, in summary, when a person has long economicexposure, whether conditional or absolute, to changes in the price ofsecurities. In particular, a person will be treated as having an "interest" byvirtue of the ownership or control of securities, or by virtue of any option inrespect of, or derivative referenced to, securities. Terms in quotation marks are defined in the City Code, which can also be foundon the Panel's website. If you are in any doubt as to whether or not you arerequired to disclose a "dealing" under Rule 8, you should consult the Panel. Not for release, publication or distribution, in whole or in part, in, into or from the United States of America, Australia, Canada or Japan RECOMMENDED OFFER BY PRUDENTIAL PLC FOR THE SHARES OF EGG PLC NOT ALREADY OWNED BY PRUDENTIAL 1 DECEMBER 2005 1. Introduction The Boards of Prudential and Egg are pleased to announce the terms of arecommended Offer, to be made by Lexicon Partners on behalf of Prudential, forthe whole of the issued and to be issued shares of Egg not already owned by thePrudential Group, representing 21.7 per cent. of the existing issued sharecapital of Egg. The Offer values the existing issued share capital of Egg at approximately £973million, a 15 per cent. premium to the market capitalisation of Egg of £845million on 30 November 2005, being the last Business Day prior to announcementof the Offer. 2. The Offer The Offer, which will be subject to the Condition and Further Terms set out inAppendix I, and to be set out in the Information Memorandum, Offer Document andForm of Acceptance, will be made on the following basis: 0.2237 New Prudential Shares for each Egg Share Based on the closing mid-market price of 527.5 pence per Prudential share on 30November 2005, the last Business Day prior to the date of this Announcement, theOffer: • values each Egg Share at approximately 118 pence; and • represents a premium of approximately 15 per cent. to the closingmiddle market price of 102.5 pence per Egg Share on 30 November 2005, being thelast Business Day prior to the date of this Announcement. Full acceptance of the Offer, assuming exercise of all in the money existingoptions under the Egg Share Option Schemes, would result in the issue of up toapproximately 41 million New Prudential Shares representing approximately 1.7per cent. of the issued ordinary share capital of Prudential as enlarged by theacquisition of the Minority. The offer of New Prudential Shares as consideration for the Acquisition willallow Egg shareholders to participate in future value creation and dividendspayable by the enlarged Prudential Group, including the benefit of cost andrevenue synergies not otherwise available to Egg as a stand-alone business. Application will be made for the New Prudential Shares to be admitted to theOfficial List of the UK Listing Authority and to trading on the London StockExchange's market for listed securities. When made, the Offer will be subject only to the condition that the admission ofthe New Prudential Shares (i) to listing on the Official List of the UK ListingAuthority becomes effective in accordance with the Listing Rules of the UKListing Authority and (ii) to trading on the London Stock Exchange's market forlisted securities becomes effective in accordance with the Admission andDisclosure Standards made by the London Stock Exchange from time to time. Further details of the bases and sources for certain information set out in thisAnnouncement are contained in Appendix II. 3. Prudential's Ownership of Egg Shares and IrrevocableUndertakings The Prudential Group owns in aggregate 645,955,847 Egg Shares representingapproximately 78.3 per cent. of Egg's existing issued ordinary share capital. In addition, 5,069,632 Egg Shares are held as investment assets in Prudential'sUK life funds and 42,848 Egg Shares in other investment funds managed by M&G. Three directors of Prudential, Philip Broadley, Roberto Mendoza, and Rob Rowley(and their close relatives) are interested in 2,610, 300,000 and 940 Egg Sharesrespectively. The Independent Committee have indicated to Prudential that they intend to giveirrevocable undertakings to accept the Offer in respect of their own beneficialholdings of Egg Shares, amounting in aggregate to approximately 856,736 EggShares, representing approximately 0.5 per cent. of Egg's existing issued sharecapital not owned by Prudential (and 0.1 per cent. of Egg's existing issuedordinary share capital). 4. Background to and Reasons for the Offer On 26 October 2005, Prudential announced its intention to retain and developEgg. It also announced that it was considering the financial and commercialcase for bringing Egg fully into the Prudential Group through a share exchangeto acquire the Minority. Having completed its analysis, the Board of Prudentialbelieves there is a strong financial and commercial case to proceed with theacquisition of the Minority. In the UK, the Prudential Group has three powerful franchises operating in thelife and pensions, retail fund management and personal banking sectors under thePrudential, M&G and Egg brands. While each of these businesses will continue tooperate as a distinct business unit following completion of this transaction,Prudential sees significant scope to create substantial financial benefits tothe Group through greater collaboration, both in terms of cost savings andrevenue opportunities. Since its launch in 1998, Egg has grown rapidly to build a strong retail bankingfranchise with strong brand loyalty and an attractive customer base. As anintegral part of Prudential's broader UK strategy, Egg has the following keyattributes: • A strong customer base with, in aggregate, approximately 3.7 millionyounger, more affluent customers. These customers are a valuable complement toPrudential's UK life and pensions and retail fund management customers. • A powerful, consumer focused brand which will present opportunitiesfor the Prudential Group to win new customers and access new markets, both forbanking and savings products as well as protection products. • A direct distribution model offering greater "ownership" of thecustomer relationship to balance Prudential's continuing and successfulintermediary-led life assurance distribution strategy. Egg has demonstrated astrong capability to generate new business at below industry average acquisitioncosts. Egg represents a scale platform from which Prudential will further develop itsexposure to the profitable and fast growing personal savings and loans market.Egg provides an effective product manufacturing capability together with apowerful, differentiated direct-to-consumer brand with a proven track record ofgenerating profitable new customer relationships. Cost Benefits Without the constraints of a publicly quoted minority, Prudential will be ableto maximise the synergy benefits from closer collaboration between Egg andPrudential UK, whilst still retaining each business as a distinct business unit. Through the Acquisition and the closer partnership of Egg with Prudential's UKlife and pensions business, Prudential expects to achieve total annualisedpre-tax cost savings across the combined businesses of £40 million by the end of2007. Cost savings across the businesses are expected to result from: • Co-ordination of Treasury activities to reduce the Group's overallfunding costs; • Co-ordination of selected activities, across customer service, IT,administration and marketing to deliver greater effectiveness and benefit fromimproved scale efficiencies; • Rationalisation of project and development spend through co-ordinationand collaboration; and • Elimination of Egg's separate listing costs and the infrastructure tosupport this listing. Restructuring costs of approximately £50 million pre-tax are estimated to beincurred from these initiatives. These will be provided for in 2006. Revenue Benefits Prudential's UK life and pensions business, Egg and M&G are highlycomplementary. Between them, these businesses have the product capabilities andexpertise to provide a comprehensive range of financial products to meet thechanging requirements of customers as they move through the different phases oftheir lives. This product range includes lending and deposit taking, retailasset management, protection, health, pensions and annuities. At present, there is very little overlap between the three businesses' customerbases. Through working together to address the needs of each business'scustomers in a systematic and targeted manner that combines banking, life andpensions and retail fund management, the Board of Prudential believes that thereare clear opportunities to increase sales to the Prudential Group's combined UKmarketable customer base of approximately 4.8 million. The Board of Prudentialhas identified the following initial revenue opportunities which will leveragethe product expertise, customer relationships and brand recognition ofPrudential UK, Egg and M&G: • Offering Prudential branded deposit and savings accounts, manufacturedby Egg, to capture maturing Prudential pension and life assurance policyproceeds. • Offering Prudential branded mortgages, manufactured by Egg, toPrudential UK's marketable customer base as well as to customers of Prudential'smulti-tie partnerships and the wider IFA community. • Offering Egg branded credit cards and unsecured loans into bothPrudential UK's direct-to-consumer and IFA customer bases through directmarketing and intermediary promotions. • Offering PruHealth products to the Egg customer base. More than 20per cent. of Egg customers currently buy their own private medical insurance. • Offering M&G branded investment products to customers of Egg andPrudential UK. Benefits for Egg Customers As a result of the Acquisition and the closer collaboration it will facilitate,the customers of Egg will benefit from an enhanced range of products,particularly in the life and pensions market. As a wholly owned subsidiary ofthe Prudential Group, Egg will also benefit from the financial strength of thePrudential Group which will enhance its competitive position in the secured andunsecured lending markets. 5. Financial Effects on Prudential The Acquisition is expected to be earnings enhancing (both on an IFRS operatingearnings per share basis and on an EEV operating earnings per share basis) forPrudential in 2006(1)(2)(3). It is also expected that Prudential's capital surplus position (on an EUFinancial Conglomerates Directive solvency basis) would increase as a result ofthe Acquisition from the date of completion(4). It is estimated that one-off restructuring costs of approximately £50 millionpre-tax will be provided for in 2006. 6. Information on Egg Launched by Prudential in October 1998, Egg is an innovative financial servicescompany, authorised as a bank by the FSA and providing a range of banking andfinancial services products that are distributed via the Internet and phone.Egg has no branches. Following its launch, Egg immediately developed strong brand recognition and wasamong the first to the market with its internet-based services and products. InJune 2000, approximately 21 per cent. of the shares of Egg were offered byPrudential in an initial public offering. Currently, Prudential holdsapproximately 78.3 per cent. of the shares of Egg with the remainder held bynon-Prudential shareholders. Egg is now one of the world's largest online banks with approximately 3.7million customers in total. Egg focuses on offering banking products and services, specifically, personalloans, credit cards, mortgage loans, and deposit and savings accounts throughits operational subsidiaries. The strategic focus of Egg over the last year has been to concentrate on itscore operations in the United Kingdom. As a result, Egg has disposed of itsinterests in France and Funds Direct, its investment platform business. Egg hasconcentrated on maximising its unsecured lending business whilst continuing toexploit new technologies to offer innovative products to its customers. Egg reported operating income and profits on continuing ordinary activitiesbefore tax on an IFRS basis for the half year to 30 June 2005 of £251.0 millionand £12.9 million respectively. As at 30 June 2005, Egg had shareholders' fundsof £336.4 million. 7. Information on Prudential Established in 1848, Prudential is a leading international financial servicescompany providing retail financial services and fund management via operationalsubsidiaries in its chosen markets of the United Kingdom, the United States ofAmerica, Asia and continental Europe. The Prudential Group has some 18 million customers, policyholders and unitholders and approximately 21,500 employees worldwide. As at 30 November 2005, Prudential had a market capitalisation of approximately£12.6 billion. In the UK, Prudential is a leading life and pensions provider. M&G, which wasacquired by Prudential in 1999, is the Prudential Group's UK and European fundmanager and is responsible for managing over £126 billion in funds (as at 31December 2004). Prudential also is the majority owner of Egg with a currentshareholding of approximately 78.3 per cent. of Egg's existing issued ordinaryshare capital. In Asia, Prudential is the leading European life assurer with life and fundmanagement operations in 12 countries. In the US, Prudential owns Jackson National Life, a leading life assurancecompany specialising in the annuity market. Through these operations, Prudential has strong positions in three of thelargest and most attractive markets in the world, where rising global wealth andchanging demographics are fuelling demand for long-term savings. Prudential'sstrategy is to build sustainable, profitable businesses in each of these marketsand maximise returns to shareholders. For the half year to 30 June 2005, the Prudential Group wrote worldwide AnnualPremium Equivalent (APE) sales of £1,129 million and reported profits oncontinuing ordinary activities before tax on an achieved profits basis(following implementation of IFRS) of £816 million. As at 30 June 2005,Prudential had achieved profit shareholders' funds of £9.3 billion. 8. Management and Employees The Board of Prudential has confirmed that the existing employment rights,including pension rights, of all employees of Egg will be fully safeguarded. Prudential intends to agree certain arrangements with the executive Directors ofEgg regarding their future participation in the operational management of Eggand details of these arrangements will be set out in the Offer Document. 9. Option Schemes The Offer will extend to any Egg Shares which are issued or unconditionallyallotted and fully paid (or credited as fully paid) while the Offer remains openfor acceptances (or, subject to the City Code, by such earlier date asPrudential may decide), including Egg Shares issued pursuant to the exercise ofoptions granted under the Egg Share Option Schemes or otherwise. To the extent that such options have not been exercised in full, Prudential willmake appropriate proposals to the holders of Egg Options. 10. Offer Document The Offer will be subject to the applicable requirements of the City Code. TheOffer Document, setting out the details of the Offer and enclosing the Form ofAcceptance, will be despatched to Egg shareholders shortly and in any eventwithin twenty-eight days of the date of this Announcement, unless otherwiseagreed with the Panel. 11. Listing, Dealings and Settlement Application will be made to the UK Listing Authority for the New PrudentialShares to be admitted to the Official List and to trading on the London StockExchange's market for listed securities. It is expected that Admission willbecome effective and that dealings for normal settlement in the New PrudentialShares will commence as soon as practicable after the Offer is made. TheInformation Memorandum will be despatched to Egg shareholders with the OfferDocument. Prudential intends to arrange for a free share dealing facility to be madeavailable to Egg shareholders resident in the UK who accept the Offer andreceive their entitlement of New Prudential Shares. This dealing facility willenable them to sell up to 300 New Prudential Shares without incurring anycharges (including dealing charges and settlement charges) and to receive theproceeds of sale in sterling. Further details of this free dealing facilitywill be provided in the Offer Document. 12. Disclosure of Interests in Egg Except for the shareholdings and irrevocable undertakings summarised inparagraph 3, neither Prudential nor, so far as the Directors of Prudential areaware, any person acting in concert with it owns or controls any Egg Shares orany securities convertible or exchangeable into Egg Shares or any rights tosubscribe for or purchase, or options (including traded options) in respect of,or derivatives referenced to, any such shares, nor does any such person have anyarrangement in relation to any such shares. For these purposes, "arrangement" includes any indemnity or option arrangement,any agreement or understanding, formal or informal, of whatever nature, relatingto the above mentioned shares which may be an inducement to deal or refrain fromtrading in such securities. 13. Delisting and Compulsory Acquisition After the First Closing date of the Offer, expected to be in mid January 2006,the Board of Egg will make an application to delist the Egg Shares from theOfficial List and to cancel trading of Egg Shares on the London Stock Exchange'smarket for listed securities. Delisting would significantly reduce theliquidity and marketability of any Egg Share not assented to the Offer at thattime. If Prudential receives acceptances under the Offer in respect of, and/orotherwise acquires, 90 per cent. or more of the Egg Shares to which the Offerrelates, Prudential will exercise its rights pursuant to the provisions ofsections 428 - 430F (inclusive) of the Companies Act to acquire compulsorily theremaining Egg Shares in respect of which the Offer has not been accepted. 14. Recommendation Roberto Mendoza and Philip Broadley are Directors of both Egg and Prudential andhave not participated in the Egg Board's deliberations in relation to the Offer. The Egg Board of Directors has established a committee of Directors who areindependent of Prudential to consider the terms of the Offer on behalf ofholders of the Minority. This committee (the "Independent Committee") comprisesRonnie Baird, Pascal Cagni, Leslie Priestley, Juan Rada, Paul Gratton and MarkNancarrow. The Independent Committee, which has been so advised by Goldman SachsInternational, considers the terms of the Offer to be fair and reasonable. Inproviding advice to the Independent Committee, Goldman Sachs International hastaken into account the commercial assessments of the Egg Board. Accordingly,the Independent Committee unanimously intends to recommend that Egg shareholdersaccept the Offer. The Independent Committee have indicated to Prudential thatthey intend to give irrevocable undertakings to accept the Offer in respect oftheir own beneficial holdings of Egg Shares, which represent approximately 0.5per cent. of Egg's existing issued share capital not owned by Prudential. Enquiries For further information, contact: Prudential Media EnquiriesJon Bunn Tel: 020 7548 3559William Baldwin-Charles Tel: 020 7548 3719Joanne Doyle Tel: 020 7548 3708 Investor / Analyst EnquiriesJames Matthews Tel: 020 7548 3561Marina Novis Tel: 020 7548 3511 Lexicon Partners (financial adviser to Prudential) Tel: 020 7653 6000Andrew SibbaldOllie ClaytonLucy Garrett UBS Investment Bank (corporate broker to Prudential) Tel: 020 7568 1000Phil Shelley Egg Media EnquiriesPress Office Tel: 020 7526 2600Emma Byrne Tel: 020 7526 2565 Investor / Analyst EnquiriesKieran Coleman Tel: 020 7526 2648 Goldman Sachs International (financial adviser to Egg) Tel: 020 7774 1000Karen CookNick ReidJonathan Sorrell JP Morgan Cazenove (corporate broker to Egg) Tel: 020 7588 2828Richard LockeMike Collar Notes: 1. Supplemental reporting European Embedded Value (EEV) earnings pershare is calculated by reference to Prudential Group's operating profit based onlonger-term investment returns after tax and minority interests and beforeexceptional items, on a European Embedded Value basis. 2. IFRS operating earnings per share is calculated by reference toPrudential Group's operating profit based on longer-term investment returnsafter tax and minority interests and before exceptional items. 3. The statements that the Acquisition will be earnings enhancing do notconstitute a profit forecast and should not be interpreted to mean that theearnings per share in the first full financial year following the Acquisition,or in any subsequent period, would necessarily match or be greater than thosefor the relevant preceding financial year. 4. The Group's Financial Conglomerates Directive solvency position iscalculated in accordance with the requirements of the directive and the FSA'sIntegrated Prudential Sourcebook. This Announcement does not constitute an offer or an invitation to purchase anysecurities. The Offer will be on the terms set out herein and in Appendix I and to be setout in the Offer Document and Form of Acceptance. It is intended that the OfferDocument (including a letter of recommendation from the Chairman of Egg) andForms of Acceptance will be despatched shortly to Egg shareholders. Appendix II contains the sources and bases for certain information set out inthis Announcement. Lexicon Partners, which is authorised and regulated in the United Kingdom by theFinancial Services Authority, is acting for Prudential only in connection withthe Offer and no-one else and will not regard any other person as its client orbe responsible to any person other than Prudential for providing the protectionsafforded to clients of Lexicon Partners nor for providing advice in relation tothe Offer. UBS is acting for Prudential only in connection with the Offer and no-one elseand will not regard any other person as its client or be responsible to anyperson other than Prudential for providing the protections afforded to clientsof UBS nor for providing advice in relation to the Offer. Goldman Sachs International, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority, is acting exclusively for Egg andno-one else in connection with the Offer and is not advising any other personand accordingly will not be responsible to any person other than Egg forproviding the protections afforded to clients of Goldman Sachs International orfor providing advice in relation to the Offer. JP Morgan Cazenove, which is authorised and regulated in the United Kingdom bythe Financial Services Authority, is acting for Egg only in connection with theOffer and no-one else and will not regard any other person as its client or beresponsible to any person other than Egg for providing the protections affordedto clients of JP Morgan Cazenove nor for providing advice in relation to theOffer. This Announcement does not constitute, or form part of, any offer for, or anysolicitation of any offer for, securities in any jurisdiction. Any acceptanceor other response to the Offer should be made only on the basis of informationcontained in or referred to in the Offer Document and the Information Memorandumwhich Prudential intends to despatch shortly to Egg shareholders. The release, publication or distribution of this Announcement in certainjurisdictions may be restricted by law and therefore persons in suchjurisdictions into which this Announcement is released, published or distributedshould inform themselves about and observe such restrictions. The laws of the relevant jurisdiction may affect the availability of the Offerto persons not resident in the United Kingdom. Persons who are not resident inthe United Kingdom, or who are subject to the laws of any jurisdiction otherthan the United Kingdom should inform themselves about, and observe, anyapplicable requirements. Further details in relation to overseas shareholderswill be contained in the Offer Document and the Information Memorandum. The Offer will not be made, directly or indirectly, in or into, or by use of themails of, or by any means or instrumentality (including, without limitation, bymeans of telephone, fax, telex or other forms of electronic communication) ofinterstate or foreign commerce of, or any facility of a national securitiesexchange of, the United States of America, Canada, Australia or Japan and willnot be capable of acceptance by any such use, means, instrumentality orfacility. Accordingly, neither this Announcement nor the Information Memorandumnor the Offer Document nor the Form of Acceptance is being, and must not be,mailed or otherwise forwarded, transmitted, distributed or sent in, into or fromthe United States of America, Canada, Australia or Japan. Doing so may renderinvalid any purported acceptance of the Offer. All Egg shareholders or otherpersons (including nominees, trustees or custodians) who would or otherwiseintend to, or may have a contractual or legal obligation to, forward thisAnnouncement and/or the Information Memorandum and/or the Offer Document and/orthe Form of Acceptance to any jurisdiction outside the United Kingdom, shouldrefrain from doing so and seek appropriate professional advice before taking anyaction. The Offer is not an offer of securities for sale in the United States of Americaor in any jurisdiction in which such an offer is unlawful. The New PrudentialShares to be issued in connection with the Offer have not been, nor will theybe, registered under the US Securities Act of 1933, as amended, or under thesecurities laws of any state of the United States of America and may not beoffered or sold in the United States of America, absent registration or anapplicable exemption from registration. No public offering of the securitieswill be made in the United States of America. The relevant clearances have notbeen, and will not be, obtained from the securities commission of any provinceor territory of Canada; no prospectus or a prospectus equivalent has been, orwill be, lodged with, or registered by, the Australian Securities andInvestments Commission or the Japanese Ministry of Finance and the NewPrudential Shares have not been, and nor will they be, registered under oroffered in compliance with applicable securities laws of any state, province,territory or jurisdiction of Canada, Australia or Japan. Accordingly,Prudential Shares may not (unless an exemption under relevant securities laws isapplicable) be offered, sold, resold or delivered, directly or indirectly, in orinto Canada, Australia or Japan or any other jurisdiction outside the UnitedKingdom if to do so would constitute a violation of the relevant laws of, orrequire registration thereof in, such jurisdiction or to, or for the account orbenefit of, a person located in Canada, Australia or Japan. This Announcement contains a number of forward-looking statements relating toPrudential and Egg with respect to, among others, the following: financialcondition; results of operation; the businesses of Prudential and Egg; futurebenefits of the transaction; and management plans and objectives. Prudentialand Egg consider any statements that are not historical facts as"forward-looking statements". They involve a number of risks and uncertaintiesthat could cause actual results to differ materially from those suggested by theforward-looking statements. Important factors that could cause actual resultsto differ materially from estimates or forecasts contained in theforward-looking statements include, among others, the following possibilities:future revenues are lower than expected; costs or difficulties relating to thecombination of the businesses of Prudential and Egg, or of other futureacquisitions, are greater than expected; expected cost savings from thetransaction or from other future acquisitions are not fully realised or notrealised within the expected time frame; competitive pressures in the industryincrease; general economic conditions or conditions affecting the relevantindustries, whether internationally or in the places Prudential and Egg dobusiness are less favourable than expected, and/or conditions in the securitiesmarket are less favourable than expected. The estimated operational cost savings and financial synergies have beencalculated on the basis of the existing cost and operating structures of thecompanies and by reference to current prices and the current regulatoryenvironment. These statements of estimated cost savings relate to futureactions and circumstances which, by their nature, involve risk, uncertaintiesand other factors. Because of this, the cost savings and financial synergiesreferred to may not be achieved, or those achieved could be materially differentfrom those estimated. These statements should not be interpreted to mean thatthe earnings per share in the first full financial year following theAcquisition, or in any subsequent period, would necessarily match or be greaterthan those for the relevant preceding financial period. Dealing Disclosure Requirements Under the provisions of Rule 8.3 of the City Code on Takeovers and Mergers, ifany person is, or becomes, "interested" (directly or indirectly) in 1% or moreof any class of "relevant securities" of Prudential or of Egg, all "dealings" inany "relevant securities" of that company (including by means of an option inrespect of, or a derivative referenced to, any such "relevant securities") mustbe publicly disclosed by no later than 3.30 pm (London time) on the Londonbusiness day following the date of the relevant transaction. This requirementwill continue until the First Closing Date. If two or more persons act togetherpursuant to an agreement or understanding, whether formal or informal, toacquire an "interest" in "relevant securities" of Prudential or Egg, they willbe deemed to be a single person for the purpose of Rule 8.3. Under the provisions of Rule 8.1 of the City Code, all "dealings" in "relevantsecurities" of Prudential or of Egg by Prudential or Egg, or by any of theirrespective "associates", must be disclosed by no later than 12.00 noon (Londontime) on the London business day following the date of the relevant transaction. A disclosure table, giving details of the companies in whose "relevantsecurities" "dealings" should be disclosed, and the number of such securities inissue, can be found on the Takeover Panel's website atwww.thetakeoverpanel.org.uk. "Interests in securities" arise, in summary, when a person has long economicexposure, whether conditional or absolute, to changes in the price ofsecurities. In particular, a person will be treated as having an "interest" byvirtue of the ownership or control of securities, or by virtue of any option inrespect of, or derivative referenced to, securities. Terms in quotation marks are defined in the City Code, which can also be foundon the Panel's website. If you are in any doubt as to whether or not you arerequired to disclose a "dealing" under Rule 8, you should consult the Panel. APPENDIX I Condition and Certain Further Terms of the Offer A. Condition of the Offer The Offer will be subject to the admission of the New Prudential Shares (i) tolisting on the Official List of the UK Listing Authority becoming effective inaccordance with the Listing Rules of the UK Listing Authority and (ii) totrading on the London Stock Exchange's market for listed securities becomingeffective in accordance with the Admission and Disclosure Standards made by theLondon Stock Exchange from time to time, or (if Prudential so determines andsubject to the consent of the Panel) the UK Listing Authority and the LondonStock Exchange agreeing to admit such shares to listing and trading respectivelysubject to allotment of such shares. B. Certain Further Terms of the Offer 1. Fractions of new Prudential Shares will not be allotted orissued pursuant to the Offer but will be aggregated and sold in the market andthe net proceeds of sale will be distributed to Egg shareholders entitledthereto save that amounts of less than £3 will not be so distributed but will beretained for the benefit of Prudential. 2. The Offer will not be made, directly or indirectly, in orinto, or by use of the mails or by any means or instrumentality (including,without limitation, by means of telephone, facsimile, telex, internet or otherforms of electronic communication) of interstate or foreign commerce of, or byany facilities of a national securities exchange of, the United States ofAmerica, nor will it be made in or into Canada, Australia or Japan and the Offerwill not be capable of acceptance by any such use, means, instrumentality orfacility or from within the United States of America, Canada, Australia orJapan. Accordingly, copies of this Announcement and any offer documents are notbeing, and must not be, mailed or otherwise forwarded, distributed or sent, inwhole or in part, in, into or from, the United States of America, Canada,Australia or Japan. 3. The New Prudential Shares to be issued in connection withthe Offer have not been, nor will they be, registered under the US SecuritiesAct of 1933, as amended, or under the securities laws of any state of the UnitedStates of America and may not be offered or sold in the United States ofAmerica, absent registration or an applicable exemption from registration. Nopublic offering of the securities will be made in the United States of America.The relevant clearances have not been, and will not be, obtained from thesecurities commission of any province or territory of Canada; no prospectus hasbeen, or will be, lodged with, or registered by, the Australian Securities andInvestments Commission or the Japanese Ministry of Finance and the PrudentialShares have not been, and nor will they be, registered under or offered incompliance with applicable securities laws of any state, province, territory orjurisdiction of Canada, Australia or Japan. Accordingly, Prudential Shares maynot (unless an exemption under relevant securities laws is applicable) beoffered, sold, resold or delivered, directly or indirectly, in or into Canada,Australia or Japan or any other jurisdiction outside the United Kingdom if to doso would constitute a violation of the relevant laws of, or require registrationthereof in, such jurisdiction or to, or for the account or benefit of, a personlocated in Canada, Australia or Japan. 4. The New Prudential Shares will be issued free from allliens, equities, charges, encumbrances and other interests. The New PrudentialShares will be issued credited as fully paid and will rank equally in allrespects with existing Prudential Shares. 5. The Egg Shares will be acquired by Prudential fully paid andfree from all liens, equities, charges, encumbrances and other interests andtogether with all rights now or hereafter attaching thereto, including the rightto receive and retain all dividends and other distributions (if any) declared,made or paid on or after the date of this Announcement. 6. Each Egg shareholder who accepts the Offer will be requiredin the form of acceptance to give certain undertakings, representations andwarranties, including with respect to matters relating to compliance withapplicable laws of any relevant jurisdictions outside the United Kingdom. APPENDIX II Sources and Bases of Information Sources and Bases In this Announcement: 1. Unless otherwise stated: (i) information relating to Egg has been extractedwithout material adjustment from the audited financial statements of Egg for therelevant financial year or from Egg's unaudited interim results and tradingstatements; and (ii) information relating to Prudential has been extractedwithout material adjustment from the audited financial statements of Prudentialfor the relevant financial year or from Prudential's unaudited interim resultsand trading statements; and 2. Unless otherwise stated, all prices quoted for Shares areclosing mid-market prices and are derived from the Daily Official List of theLondon Stock Exchange. 3. The value of the whole of the issued share capital of Egg ofapproximately £973 million is based upon 824,451,575 shares being the number ofexisting issued shares of Egg as at the date of this Announcement and an offervalue of 118 pence per Share. 4. The number of New Prudential Shares to be issued pursuant tothe Offer, being 41,093,019 (assuming full acceptance of the Offer and fullexercise of in the money Egg options) is based on 824,451,575 Egg Shares inissue and 5,201,271 in the money Egg options outstanding on 17 November 2005. 5. All share prices expressed in pence and all percentages havebeen rounded to one decimal place. 6. In the money options are those Egg options with an exerciseprice below the offer value of 118 pence per Share. 7. References to Egg Shares owned by the Prudential Group donot include Egg Shares held as investment assets in Prudential's UK life fundsor other investment funds managed by M&G. 8. All references to customer numbers of Prudential UK or thePrudential Group include individuals with Prudential branded general insurancepolicies to whom Prudential is entitled to market products. 9. The marketable customers of Prudential UK, Egg and M&G areapproximately 2.5 million, 2 million and 0.25 million respectively. APPENDIX III Definitions The following definitions apply throughout this Announcement unless the contextotherwise requires:"Acquisition" means the proposed acquisition by Prudential pursuant to the Offer of the whole of the issued and to be issued share capital of Egg that Prudential does not already own;"Admission" means the admission of the New Prudential Shares to the Official List in accordance with the Listing Rules and to trading on the London Stock Exchange's market for listed securities in accordance with the Admission and Disclosure Standards;"Admission and Disclosure Standards means the requirements contained in the publication "Admission and" Disclosure Standards" dated July, 2005 (as amended from time to time) containing, amongst other things, the admission requirements to be observed by companies seeking admission to trading on the London Stock Exchange's market for listed securities;"Announcement" means this announcement;"Australia" means the Commonwealth of Australia, its territories and possessions and all areas subject to its jurisdiction and any political sub-division thereof;"Business Day" means any day (other than a Saturday or Sunday) on which banks generally are open for business in London (other than solely for settlement and trading in euro);"Canada" means Canada, its territories and possessions and all areas subject to its jurisdiction and any political sub-division thereof;"City Code" means the City Code on Takeovers and Mergers of the United Kingdom;"Companies Act" means the Companies Act 1985;"Condition" means the condition to the Offer set out in Appendix 1 (A);"Disclosure Rules" means the disclosure rules and regulations made by the UK Listing Authority;"Egg" or the "Company" means Egg PLC;"Egg Board", "Board of Egg" or "Egg means the board of directors of EggBoard of Directors""Egg Group" means Egg and its subsidiary undertakings;"Egg Share Option Schemes" means the Egg Employee Share Option Plan and the Egg Savings-Related Option Scheme;"First Closing Date" means the date 21 days following the posting of the Offer Document;"Further Terms" means the further terms of the Offer set out in Appendix I(B);"Independent Committee" means a committee of the Board of Directors of Egg which is comprised of Ronnie Baird, Pascal Cagni, Leslie Priestley, Juan Rada, Paul Gratton and Mark Nancarrow;"Information Memorandum" means the document equivalent to a prospectus to be sent to Egg shareholders in connection with the proposed issue of New Prudential Shares and application for admission to the Official List and to trading on the London Stock Exchange's market for listed securities pursuant to the Offer;"Japan" means Japan, its cities, prefectures, territories and possessions;"JP Morgan Cazenove" means JP Morgan Cazenove Limited,"Lexicon Partners" means Lexicon Partners Limited;"Listing Rules" means the listing rules and regulations made by the UK Listing Authority;"London Stock Exchange" means London Stock Exchange plc;"Minority" the issued and to be issued share capital of Egg other than that already owned by the Prudential Group;"M&G" means Prudential's UK and European fund management business;"New Prudential Shares" means Prudential Shares proposed to be issued fully paid to Egg shareholders pursuant to the Offer;"Offer" means the offer recommended by the Directors of Egg to be made by Lexicon Partners on behalf of Prudential to acquire the whole of the issued and to be issued share capital of Egg held by the Egg shareholders as set out in the Offer Document, the Information Memorandum and, where the context admits, any subsequent revisions, variations, extensions or renewals thereof;"Offer Document" means the document to be sent to Egg shareholders containing the Offer;"Official List" means the list maintained by the UK Listing Authority;"Panel" means the United Kingdom Panel on Takeovers and Mergers;"Prudential" means Prudential PLC;"Prudential Shares" means the ordinary shares of 5 pence each in the capital of Prudential;"Prudential UK" Prudential's UK life and pensions business and related operations;"Prudential Board", "Board of means the board of directors of Prudential;Prudential" or "Prudential Board ofDirectors""Prudential Directors" means the directors of Prudential, and "Prudential Director" means any one of them;"Prudential Group" means Prudential and its subsidiary undertakings excluding Egg and the Egg Group;"Shareholders" means the holders of Shares;"Shares" or "Egg Shares" means the ordinary shares of 50 pence each in the capital of Egg;"UBS Investment Bank" or "UBS" means UBS Limited;"UK" or "United Kingdom" means the United Kingdom of Great Britain and Northern Ireland;"UK Listing Authority" means the United Kingdom Financial Services Authority in its capacity as the competent authority for listing under Part VI of the UK Financial Services and Markets Act 2000; and"US" or "United States" or "United means the United States of America, its territories and possessions,States of America" any State of the United States and the District of Columbia.All references to legislation in this announcement are to the legislation of England and Wales unlessthe contrary is indicated. Any reference to any provision of any legislation shall include anyamendment, modification, re-enactment or extension thereof.Words importing the singular shall include the plural and vice versa, and words importing the masculinegender shall include the feminine or neutral gender. For the purpose of this announcement, "subsidiary", "subsidiary undertaking", "undertaking" and "associated undertaking" have the meanings given by the Companies Act (but for this purpose ignoringparagraph 20(1)(b) of Schedule 4(A) of the Companies Act).References to "£", "sterling", "p" and "pence" are to the lawful currency of the United Kingdom. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Prudential