Prudential ends bid for insurer
By Michael Flahertyand Denny Thomas |
June 3, 2010, Thursday
|
Print Edition
Print Edition
UNITED Kingdom insurer Prudential Plc is pulling out of its bold US$35.5 billion takeover of AIG's Asian life-insurance arm, ending a three-month battle with shareholders who had argued the deal was over-priced.
The widely expected move in Hong Kong yesterday came after American International Group rebuffed Prudential's attempt to lower its offer, and could pave the way for American International Assurance's potentially up to US$15 billion initial public offering.
"We listened carefully to shareholders over the price and initiated a renegotiation of the terms with AIG. Unfortunately, it has not been possible to reach agreement," Prudential Chairman Harvey McGrath said. "We are therefore withdrawing from the transaction."
Prudential's Hong Kong-listed shares jumped as much as 7.1 percent to HK$68 (US$8.72), tracking a 6.3 percent rise in its London-listed shares on Tuesday.
The failure of what would have been the biggest insurance M&A deal on record could make the position of Prudential's management untenable and increase the call for the British firm to be broken up, analysts and fund managers have said. But a graceful retreat would help Prudential avoid an embarrassing defeat at the hands of shareholders, who were due to vote next Monday on the deal and a US$21 billion rights issue to help fund it.
Chief Executive Tidjane Thiam, who has been in the job less than a year, had driven the transformational deal, but shareholders have pointed to tactical errors, including a delay in the release of the rights-offer prospectus.
Thiam argued the AIA deal would give the 162-year-old British insurer a rare opportunity to grab a commanding presence in Asia. But shareholders said the deal was expensive and there was risk in integrating staff and agents of two fierce insurance rivals.
"Thiam's tenure as CEO does not look secure," said David Buik, London-based partner at BGC Partners.
"Thiam's audacious plan of changing the emphasis of its operations away from the UK and the United States to the Far East was a very big ask in an environment where the financial sector is just recovering."
Prudential said it would not proceed with the planned rights offering in London and Hong Kong.
Prudential estimated the cost of the failed AIA transaction so far at about 450 million pounds (US$659 million), which includes a break-up fee of 152.6 million pounds.
AIG CEO Robert Benmosche was reportedly in favor of a revised deal as it offered more liquidity.
The UK insurer originally offered US$35.5 billion for AIA, then lowered that to US$30.4 billion amid resistance from its shareholders over the price.
The widely expected move in Hong Kong yesterday came after American International Group rebuffed Prudential's attempt to lower its offer, and could pave the way for American International Assurance's potentially up to US$15 billion initial public offering.
"We listened carefully to shareholders over the price and initiated a renegotiation of the terms with AIG. Unfortunately, it has not been possible to reach agreement," Prudential Chairman Harvey McGrath said. "We are therefore withdrawing from the transaction."
Prudential's Hong Kong-listed shares jumped as much as 7.1 percent to HK$68 (US$8.72), tracking a 6.3 percent rise in its London-listed shares on Tuesday.
The failure of what would have been the biggest insurance M&A deal on record could make the position of Prudential's management untenable and increase the call for the British firm to be broken up, analysts and fund managers have said. But a graceful retreat would help Prudential avoid an embarrassing defeat at the hands of shareholders, who were due to vote next Monday on the deal and a US$21 billion rights issue to help fund it.
Chief Executive Tidjane Thiam, who has been in the job less than a year, had driven the transformational deal, but shareholders have pointed to tactical errors, including a delay in the release of the rights-offer prospectus.
Thiam argued the AIA deal would give the 162-year-old British insurer a rare opportunity to grab a commanding presence in Asia. But shareholders said the deal was expensive and there was risk in integrating staff and agents of two fierce insurance rivals.
"Thiam's tenure as CEO does not look secure," said David Buik, London-based partner at BGC Partners.
"Thiam's audacious plan of changing the emphasis of its operations away from the UK and the United States to the Far East was a very big ask in an environment where the financial sector is just recovering."
Prudential said it would not proceed with the planned rights offering in London and Hong Kong.
Prudential estimated the cost of the failed AIA transaction so far at about 450 million pounds (US$659 million), which includes a break-up fee of 152.6 million pounds.
AIG CEO Robert Benmosche was reportedly in favor of a revised deal as it offered more liquidity.
The UK insurer originally offered US$35.5 billion for AIA, then lowered that to US$30.4 billion amid resistance from its shareholders over the price.
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