views

Pru refuses to commit board to rights issue

PRUDENTIAL was last night unable to confirm that any of its directors will fully participate in its $21bn (£14bn) cash call, even as they campaign for shareholders to back the move.

Members of the insurer’s board, including chief executive Tidjane Thiam and chairman Harvey McGrath, are exempt from taking up all their rights in what has been dubbed a “get out clause”. Because of the mammoth size of the fundraising, senior figures will be allowed to sell some of their rights in order to take up the remainder – a practice known as “swallowing the tail”.

Michael McLintock, the head of Prudential’s UK fund management arm M&G, is likely to be among those declining to exercise their rights in full. McLintock owns 663,800 shares in Prudential, according to the company’s annual report in March. He would have to pay £3.4m to take up his rights, which are being offered at 104p on a basis of 11 rights shares for every two existing shares.

Although McLintock earned more than £2m last year in salary, bonus and benefits, it is understood the clause was put in place so directors would not have to overstretch themselves financially.

Thiam, McGrath and Clark Manning, head of Prudential’s US fund management business Jackson Life, are also facing bills of around £1.5m apiece to take up their rights.

A spokesperson refused to say whether they would take part in the rights issue in full. He stated: “Every single director is either taking up their rights or swallowing the tail. No director on the board is selling their rights for cash.”

But City insiders said the move was unusual. When Lloyds Banking Group broke records with its £13.5bn balance sheet fix last year all its directors took up their rights.

The news comes as Prudential races to convince investors to support the cash call to fund its $35.bn takeover of AIA in Asia. Thiam is in Scotland today for meetings with Baillie Gifford and Scottish Widows Investment Partnership.

He is also expected to sit down with David Cummings of Standard Life, who openly criticised the merger this week. Cummings said: “I think they will have quite a lot of trouble raising that cash… We and other shareholders think the price is too high and the financial case for the deal hasn’t been particularly well articulated.”

Meanwhile, to meet new disclosure rules for its Hong Kong listing, Prudential has revealed its highest-paid non-board employees. Last year three individuals, thought to be fund managers from M&G and Jackson Life, earned in excess of £5m each.

HARVEY MCGRATH, CHAIRMAN
Shares: 296,785
Cost of taking up rights: £1.5m

TIDJANE THIAM, CHIEF EXECUTIVE
Shares: 291,901
Cost of taking up rights: £1.5m

NIC NICANDROU, CHIEF FINANCIAL OFFICER
Shares: 114,653
Cost of taking up rights: £580k

ROB DEVEY, HEAD OF UK
Shares: 50,575
Cost of taking up rights: £255k

CLARK MANNING, HEAD OF JACKSON LIFE
Shares: 277,273
Cost of taking up rights: £1.4m

MICHAEL MCLINTOCK, HEAD OF M&G
Shares: 663,818
Cost of taking up rights: £3.4m