Prudential investors welcome AIA bid rejection
Investors of Prudential Plc have welcomed the high odds that the Hong Kong-listed UK insurer’s bid to acquire AIA will ultimately fail after AIG, parent of AIA, turned down its watered-down offer.
“After careful consideration, the company will adhere to the original terms of its previously announced agreement with Prudential,” AIG said in a statement Tuesday. “The company will not consider revisions to those terms.”
Prudential previously offered $35.5 billion for AIA, AIG’s wholly-owned pan-Asia life insurance subsidiary. But it proposed some revisions to AIG earlier this week, seeking better terms for the deal, after outcries by some of its shareholders that the UK insurer is overpaying for AIA.
The revisions include a reduction in the offer price for AIA to $30.375 billion, comprising $23 billion cash, $5.375 billion worth of shares in the combined companies and $2 billion in notes.
Prudential has scheduled a June 7 meeting of shareholders to seek approval for the deal. It needs to line up 75 percent support from shareholders to approve the deal. Reports said research suggested some investors would back the deal only if the offer price is cut by more than 10 percent.
The Hong Kong-listed shares of Prudential rose 3.74 percent or HK$2.30, in sharp contrast to a 1.36 percent drop in the benchmark Hang Seng Index on Tuesday. Its UK-listed shares also gained 4 percent or 21.5 pence in early London trading, after AIG announced its rejection of the revised takeover offer.
“Prudential’s price-cut demand is an attempt to win over its investors who consider the deal to be too expensive,” said director of Philip Securities Louis Wong in Hong Kong. “AIG does have a plan B, which could still list its AIA unit in Hong Kong later to raise cash to repay the US government, even if this deal fails to go through.”
AIG reported almost $100 billion in net losses after the collapse of the US housing market during the financial crisis in 2008. The US government, which spent more than $180 billion to rescue the insurer and owns an almost 80 percent stake in AIG, signaled last week that an offer price of around $30 billion may be too low.
Prudential has suffered a series of setbacks since it unveiled plans to acquire AIA in March, including delaying its rights offer to May, as UK regulators expressed concern about the capital strength of the enlarged company.
Opponents of the deal have also formed a Prudential Action Group, seeking to assemble support for a vote of no confidence in the Prudential’s chief executive Tidjane Thiam.
However, a report without citing the source said Prudential’s biggest investor, Los Angeles-based Capital Group, which controls 13 percent of stake, is ready to vote in favor of the deal if the offer price for AIA is cut to between $31 billion and $32 billion.
China Daily
(HK Edition 06/02/2010 page3)
http://www.chinadaily.com.cn/hkedition/2010-06/02/content_9919793.htm