Prudential Boss Defends £23bn Asian Deal
10:28pm UK, Tuesday March 02, 2010
The boss of insurance giant Prudential has defended his ambitious expansion plans after the company’s shares plunged for a second day.
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Speaking on Jeff Randall Live, chairman Harvey McGrath insisted that the deal to purchase AIA, the Asian business of bailed-out US insurer AIG, would be a success.
“The combination of these two businesses in Asia is a great fit,” he said.
“We will become the leading life insurer in the fast-growing markets in south-east Asia.”
He added that Prudential has decades of experience in the region.
“We know this business in Asia very well. We’ve been in Asia 80 years.
“AIA, the business we are acquiring, has been there for a tiny bit longer: 100 years.”
Since announcing the £23bn takeover plan, which was first revealed by Sky’s City editor Mark Kleinman, Prudential’s share price has fallen by 114p.
That means £3.1bn has been wiped off the insurer’s market value.
Paying for the acquisition of AIA will involve the biggest rights issue in British corporate history, estimated at £13bn.
It is expected there will be a 90% takeup among shareholders.
Sovereign wealth funds are also expected to take a significant stake.
The deal will prove a bonanza for City advisers as their fees could reach £600m.
Meanwhile credit bureau Fitch has warned it may cut Prudential’s rating.
Prudential is currently Britain’s second biggest insurer and the takeover of AIA would catapult it into the top league of the global financial services industry.
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Submited at Wednesday, March 3rd, 2010 at 12:00 am on Business by steve
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