Pru deal held on knife edge

ONE of Prudential’s most vocal supporters has urged the insurer to be honest about recent regulatory problems when it publishes the prospectus for its mammoth rights issue.

Chief executive Tidjane Thiam and chairman Harvey McGrath have effectively staked their careers on pushing through the $21bn (£14bn) cash call and $35.5bn acquisition of AIA in Asia. They need 75 per cent of shareholders to vote in favour of the move in early June.

Martin Brown of Ignis Asset Management, which runs £7.5bn of UK assets, said the chances of investors voting down the deal had increased after last-minute wrangles over capital strength with the FSA last week led to an embarassing delay.

But Brown said: “That can be quickly turned around if management does the sensible thing and is upfront and honest about what the problem was and how they have resolved it. How serious are the FSA’s concerns -- is it just a question of shifting capital around or is it a more significant issue?”

Prudential is expected to publish the rights issue terms early next week after rearranging the funding of the AIA deal to satisfy the FSA. AIA’s parent, AIG, is understood to have agreed to cut $2bn from the cash element.