Prudential abandons bid for AIA

Prudential

Last Updated at 22 Dec 2014, 11:30 ET Prudential one month chart
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UK insurer Prudential has scrapped plans to buy AIA, the Asian business of US insurer AIG.

The deal collapsed after Prudential failed to negotiate a lower price for AIA.

In March, Prudential agreed to buy AIA for $35.5bn (£24.6bn), but last week asked for the price to be cut to nearer $30bn after shareholder opposition.

AIG said on Tuesday that it would not "not consider" any revision to the terms of the deal.

The Prudential said it faced £450m ($653m) in costs related to the deal, including a break fee of about £152m.

The company's shares were 3.3% lower in early morning London trading and later closed 2.5% down at 561 pence.

On Tuesday, reports that the deal was being pulled had sparked a share price rise among relieved shareholders.

Hard thinking

Start Quote

It shows that investors have become much less supportive than they were of companies that want to become global monsters through takeovers”

End Quote Robert Peston BBC business editor

Prudential had sought to fund the takeover by raising £14.5bn from shareholders through a rights issue, the biggest in the UK's history.

But a number of the company's shareholders were opposed to the bid, believing the price being offered was too high.

They formed a rebel shareholder group, the Prudential Action Group, which planned to oppose the deal at a shareholder vote due to be held on 7 June.

That vote will not now be held.

Prudential chairman Harvey McGrath said the firm had taken heed of its investors wishes.

"We listened carefully to shareholders over the price and initiated a renegotiation of the terms with AIG," Mr McGrath said.

"Unfortunately, it has not been possible to reach agreement... we are therefore withdrawing from the transaction."

Prudential - the story

  • 1854 - Enter the man from the Pru - doorstep reps start selling life assurance to middle classes
  • 1856 - Adds children's policies, sales expand
  • 1879 - Moves into purpose-built premises in Holborn, London - largest life assurance company in Britain
  • 1912 - Government takes responsibility for social welfare for first time under Lloyd George - Pru plays major role
  • 1923 - First overseas agency set up in India, others follow
  • 1997 - Prudential branchless bank launched, becomes Egg - now world's largest internet-only bank
  • 2007 - Egg sold to Citigroup
  • 2010 - Launches $35.5bn bid for AIA

The collapse of the deal is expected to raise questions about the future of both him and his chief executive, Tidjane Thiam, with the company.

One of the Pru's bigger shareholders, Robert Talbot, chief investment officer at Royal London Asset Management, said some hard thinking was now needed.

"There certainly needs to be a proper review as to how the board came to the decision that this was the right deal at the right price - and who most strongly proposed that particular transaction," Mr Talbot told BBC Radio 4's Today programme.

The BBC's business editor, Robert Peston, said the deal was "an important event in the history of British stock market capitalism".

"It shows that conventional investment institutions are prepared to act more like the independent owners of a business and not as absentee landlords too readily compliant with the wishes of managers," he said.

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FROM OTHER NEWS SITES
Arab News Prudential ends $35.5bn Asian takeover bid - 10 hrs ago
Reuters Prudential confirms AIG deal terminated - 14 hrs ago
The Sun Call to 'quit' as Pru deal flops - 14 hrs ago
Citizen.co.za Prudential ditches Asian takeover - 18 hrs ago
Insurance and Technology U.K.'s Prudential Ends $35.5 bln Asian Takeover Bid - 22 hrs ago

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