PRUDENTIAL chairman Harvey McGrath faces a testing encounter with Henderson Global Investors this week as he tries to save his job following the failed bid for AIA in Asia.
McGrath, who has spent the past fortnight speaking to shareholders after the $35.5bn (£24bn) takeover of AIG’s Far Eastern arm collapsed, is due to visit four fund managers at Henderson’s offices on Bishopsgate. The discussion is likely to be lively as Henderson is one of the few City investors to have been openly critical of the AIA deal.
In a blog post a fortnight ago, George Latham, head of Henderson’s sustainable and responsible investment team, said the asset manager had written a “frank” letter to Prudential describing the transaction as “both too expensive and carrying too much execution risk”.
Referring to Prudential’s chief executive, who has faced questions over his leadership alongside McGrath, Latham added: “[Tidjane] Thiam (at the time of writing) is still resisting calls for his resignation. Whether he manages to cling on at the Prudential or whether he goes, his experience will no doubt prove salutary for other ambitious management teams who fail to engage an increasingly active institutional shareholder base.”
Shareholders were furious when it emerged Prudential’s board had squandered £450m – equal to its 2009 dividend – on advisory fees for the aborted AIA tie-up. Richard Buxton of Schroders said management had to be held to account or “we’re giving every chief executive carte blanche to have a pop at deals without consideration for any downside risk”.
McGrath met top-10 investor Fidelity yesterday. Although Prudential said talks were “cordial” and “no specific resignations were called for”, it is understood Fidelity warned a symbolic scalp of Prudential’s choosing may be needed to draw a line under the fiasco.
McGrath is also set to meet the National Association of Pension Funds (NAPF) today. NAPF head of corporate governance David Paterson said: “We are not planning to suggest specific changes, but we are looking to discuss the long-term interests of the business and its challenges.”