PRUDENTIAL’S future was hanging in the balance last night after its dream of taking over AIA died, drawing a line under what one shareholder called “an unprecedented shambles”.
The insurer is expected to tell the London stockmarket this morning it will abandon its calamitous $35.5bn (£25bn) pursuit of AIG’s Asian operation. Following a series of mishaps that frustrated investors, Prudential’s bid was effectively torpedoed when AIG’s US government backers refused to shave $5bn from AIA’s price in 11th-hour haggling.
Sources close to Prudential said it would pull out of the transaction rather than face the humiliation of being voted down by more than 25 per cent of its shareholders at a meeting on 7 June.
According to one estimate, the beleaguered blue chip will now have to pay up to £500m in break fees and advisory costs – the equivalent of its 2009 dividend.
Chief executive Tidjane Thiam and chairman Harvey McGrath called a lengthy board meeting yesterday as Prudential’s shares soared on news of the failed talks with the US Treasury. It is understood neither man is close to resigning even though some shareholders want their scalps.
Robin Geffen of Neptune Investment Management, who led a campaign against the AIA tie-up, said: “It’s a matter of honour. Given what’s happened it’s inconceivable they can continue. This is a shambles on an unprecedented scale.”
One large shareholder, who asked to remain anonymous, said McGrath’s position was more precarious than Thiam’s. “The chairman has let himself down. He should have kept the new chief in check and warned him of the potential pitfalls. This is a fiasco.” M&G boss Michael McLintock and former Prudential head Mark Tucker were two names being bandied about for the post of interim chief executive. But some investors called for reflection before any management changes.
A second shareholder said: “Whether senior management think they have lost so much of the shareholders’ support they can’t continue, I don’t know. It’s going to be a personal decision.”
Prudential shares gained 6.3 per cent to 575.5p on hopes of a break-up bid for the company.
Analysts at BNP Paribas put out a note remarking the insurer could be in play, echoing previous rumours of interest from Clive Cowdery’s Resolution and Aviva.
However, one investor said the outcome was far from obvious. “It’s the wrong time in the cycle to be breaking up the Pru,” he said.