Prudential sized up as bid target as investors price in a break-up offer

PRUDENTIAL’S share price climbed yesterday as the market wrote off its chances of taking over Asian insurer AIA for $35.5bn (£24bn) and began pricing in a break-up bid.

Shares in Prudential closed marginally up at 549.5p after flying in morning trading. The optimism was spurred by management’s failure to put out the prospectus for a whopping $21bn cash call, which was blocked after the Financial Services Authority said it had was worried about the enlarged group’s capital strength.

Prudential insists it will be able to complete the takeover as planned by the third quarter. The insurance behemoth hopes to price its rights issue on Monday night and publish its prospectus on Tuesday morning, it is understood.

But several analysts said the deal looked dead in the water as Prudential would struggle to get 75 per cent shareholder approval for its cash call.

Barrie Cornes of Panmure Gordon said the acquisition was “on balance less likely to go through” than before the FSA fiasco.

A collapse of the AIA deal would lead to the resignation of chief executive. Tidjane Thiam and chairman Harvey McGrath, and put Prudential in play. Clive Cowdery’s Resolution has enough firepower lined up to buy Prudential’s UK operations and is thought to be looking at the insurer with interest.