Prudential's £24.5 billion bid to takeover AIA from AIG stirs up a storm among investors and UK's Finance industry


Prudential reported that it’s currently in talks with AIG over the terms of its planned £24.5 billion takeover of AIA (Asian arm of AIG’s operations); however, there was no certainty it would lead to a change of the takeover terms.


The company was forced into rethinking its proposed takeover investment plans due to a potential rebellion by its shareholders. Shareholders with up to 15% of Prudential ownership said they are readying themselves to write to the chairman informing him they will oppose the insurer’s takeover plans. Some big institutional investors are expected to write to Harvey McGrath within the next 48 hrs. This move is a big blow to the company’s chance of acquiring the 75% approval it requires to seal the deal and comes as the Association of British Insurers, the big institutional investors lobby group, issued an amber-top warning on the deal.


Prudential’s chief executive Tidjane Thiam, who is currently under a lot of career pressure to seal the deal, was in New York last night in a bid to convince US investors to back the acquisition. Sources close to the deal said that despite the fact that the key shareholder vote was just over a week away, there was still time for the company to try to cut the deal price as it’s the bone of contention.


Most investors in Prudential want it to cut down the takeover price. Opposition to the company’s plans, which are to be partly paid for by an astounding £14.5 billion rights issue, have hardened especially with the dive in the Asian markets from the announcement of the bid two weeks ago.


Rather than write a single shareholder letter, most shareholders have decided to write to the company individually and the institutional shareholders could not agree on the wording of their collective letter expected in 48 hrs. Robin Geffen, co-founder of Neptune Investment Management that owns about £50 million in Prudential shares is understood to be trying to garner opposition to the AIA acquisition.


He reiterated yesterday that institutional shareholders accounting for over 15% had privately told him they would vote “no”. Prudential has experienced major setbacks ever since it made its acquisition plans for AIA from AIG public in March.  This subsequently led to a last minute intervention by the Financial Services Authority amid worries over the solvency of the expanded group. It emerged yesterday that ABI had issued an “amber top” alert warning to investors over the complexities and the sheer scale of the transaction.


May 29, 2010.