JUST over a year after his forerunner Mark Tucker failed to buy American International Group’s Asian business, Prudential boss Tidjane Thiam is ready for another bite of the cherry.
Tucker’s offer was turned down by AIG in late 2008 on valuation grounds. Thiam’s plan to raise £15bn through what would be a record-breaking share placing – the sum is equal to Prudential’s entire market capitalisation – underlines his determination to put together an offer AIG and its government owners will find difficult to refuse.
With 11m customers in Asia, Prudential has always played second fiddle to American International Assurance, whose client base is roughly double the size. AIA has $60bn (£39.3bn) under management in the region and was being prepped for a healthy-sized initial public offering (IPO) this month until Thiam rapped on the boardroom door.
It is understood plans to raise up to $20bn through a stockmarket listing are now on the backburner as talks between Prudential and AIG enter an advanced stage.
Prudential’s move, thought to have been made at the end of 2009, is a natural step for a company that already has its eyes fixed on the Far East. People familiar with the deal describe it as a “fantastic” opening.
Thiam wants to increase the proportion of new business profits Prudential generates from the region to 80 per cent by 2015 from 57 per cent now. Writing in January ahead of the World Economic Forum in Davos, Thiam described Asia’s rapid development as “a clear opportunity”.
“Today, every company with international ambitions knows that it needs a meaningful presence in Asia,” he said, adding Prudential’s future prosperity depended on approaching the Far East with “determination”.
From AIG’s point of view, a trade sale may now make more sense than an IPO. Preparations for the float began last year when Asian markets were in full flow, but conditions have cooled in 2010.
AIG remains fragile, notching up a quarterly loss of $8.9bn last Friday. The board and the government will be determined to get a good price.
PRUDENTIAL’S BID FOR AIA
JPMORGAN, HSBC, CREDIT SUISSE AND LAZARD
INVESTMENT bankers were licking their chops at the prospect of a Hong Kong listing for American International Assurance.
Morgan Stanley and Deutsche Bank would have earned hundreds of millions of dollars as joint global coordinators for the flotation, with Blackstone advising on strategy and seven more banks running the books.
Prudential’s gatecrashing attempt will be similarly lucrative. Backed by JPMorgan, HSBC and Credit Suisse, with Lazard advising, the British firm will need underwriting for its mooted rights issue.
Financing will also be required to make up some of the £8bn gap between Prudential’s rights issue value and AIG’s asking price.