EVERYTHING about Prudential’s play for AIA happened back-to-front.
Desperate to pounce on the Asian business before it floated, Prudential boss Tidjane Thiam raced in with the generous offer of $35.5bn (£25bn) – 25 times new business profits, a multiple unheard of for insurers even in China – and then had to work backwards to model an aggressive scenario to make the numbers work.
The news leaked before the idea could be properly road-tested with Prudential’s largest shareholders, meaning a dialogue that should have happened sensibly behind closed doors was increasingly played out through the press.
And the British company was finally found trying to batter AIA’s price down in last-ditch talks with the US government over the bank holiday weekend, a discussion it should have had before Christmas when the batting opened.
At $30.4bn it might just have worked. A multiple of 1.4 times embedded value (EV) rather than 1.6 times would have been more palatable, and the deal would have been earnings neutral by 2013.
That’s the poignant thing: AIA was almost a great concept. But at the wrong price, a good idea quickly became a bad deal.