TEMASEK, Singapore’s largest sovereign wealth fund, is considering lending its support to Prudential’s $21bn (£13.9bn) rights issue as a cornerstone investor, City A.M. understands.
The $120bn (£79.4bn) government investment vehicle is one of several Asian institutions looking with interest at the terms of the rights issue published this morning. The exact price and timing of the cash call will be important to Temasek, market sources said, as will Prudential’s future growth forecasts.
Prudential wants to raise the money to embark on a do-or-die $35.5bn takeover of AIA, the Asian arm of American insurer AIG. Before Prudential entered its bid, AIA was being prepared for an initial public offering in Hong Kong, meaning Far Eastern investors such as Temasek were already “warmed up” to the idea of buying the company.
A source said the Singaporean state fund had not yet decided whether to support the rights issue but added: “The next few days will be critical. They are watching with interest.”
It is understood Temasek could either buy shares when they list in Singapore and take up its rights, wait to buy rights traded in the market or take “rump” rights should any unwanted options be left with the deal’s 30 underwriters.
One option being discussed is for Temasek to come in as a cornerstone investor, in which case it would subscribe a large chunk of new equity on preferential terms.
Prudential is expected to offer investors an estimated four new shares for each share they already own at around 140p a share when it unveils the terms of its $21bn rights issue today, according to analysts’ calculations.