THE collapse of the $35.5bn (£25bn) AIA takeover means Prudential will focus on smaller bolt-on acquisitions rather than headline-grabbing mega-deals, the firm indicated yesterday.
Asked by a small shareholder to comment on some of the lessons learned from the implosion of Prudential’s bid for AIG’s Asian subsidiary, chairman Harvey McGrath said: “In the post-crisis world we live in, doing large cross-board acquisitions in financial services is going to be very difficult.”
McGrath said investors should expect smaller, opportunistic purchases as a way to propagate the group’s strategy in the Far East. He pointed out its £192m takeover of Singaporean life insurer UOB in January as an example.
But despite the mishaps of the past 14 weeks, he refused to rule out another approach for AIA in the future. Mark Tucker, the previous chief executive of Prudential, modelled its Asian operations on those of AIA, which McGrath said were a source of “fascination”.
“They are a competitor and we are obviously interested to see what happens to the business after our transaction was not consummated, so let’s see,” he said. Asked on the topic again later, McGrath added: “Whether they do an IPO [initial public offering] remains to be seen. We will follow all developments with interest.”
The non-executive boss dismissed the idea of floating Prudential’s own Asian arm in the immediate term, which some analysts and shareholders have speculated on as a way to realise its value.
“The board does regularly review where value can be created and that includes whether there are better ways in which ownership of elements of the group can be better effected,” he said. “[But] it’s not in our view, in the short term, the right thing to do.”
Meanwhile, chief executive Tidjane Thiam reaffirmed the company’s commitment to the UK after hints its British arm could be sold off.
FORMER PRU EMPLOYEE AND SMALL INVESTOR
ANTHONY Watts, a former Prudential agent from Northampton, gave chairman Harvey McGrath the biggest headache of the general meeting when he stood up to ask a question.
The retired 61-year-old lambasted the board for failing to spot the weaknesses of the AIA transaction despite their experience. “I can’t believe it,” he said. “You’re all experts – look at your CVs... You failed to get the deal through the second time. You’re all failed but you can’t see it.”
Watts called on McGrath and Tidjane Thiam, Prudential’s chief executive, to “do the honourable thing”. His impromptu speech received a round of applause from other disgruntled shareholders, who began calling out for board-level resignations.
Despite the edgy encounter, Watts and McGrath exchanged calmer words at the following lunch put on at the conference centre around the corner from the House of Commons. Watts teased McGrath for lacking “common sense” by trying to take AIA at too high a price. McGrath responded diplomatically by saying Watts had made his point well.
Watts told City A.M. he was moved to take a stand after talking to other angry Prudential investors in the Northampton area. “The offer [on the proposed rights issue], which was 11 for two – there are lots of people who can’t afford to buy the shares, so they’d get diluted,” he said. “I don’t think they’d thought it through properly.”
Other shareholders voiced their discontent during the meeting. Eddie Gould said his rights issue prospectus arrived the morning after the cash call was cancelled. Brian Gee pointed to the company’s logo and suggested “Prudence up there, looking at the mirror, is red in the face”.
But a number of individuals stood up to back the board. Rob Guinness congratulated McGrath and Thiam for “running Prudential as a successful business”. “2009 was a good year and many of my fellow shareholders will be delighted in the increase in the dividend,” he said. Guinness suggested a smaller rights issue to buy a chunk of AIA after its likely flotation.