Tuesday, May 25, 2010

Prudential Asia Listing

Prudential Plc shares fell during their Asia debut on Tuesday. This could be attributed to the global sell-off (Greece debt and Korea crisis) as well as concern by investors over shareholder support for its planned purchase of AIG's Asian life insurance business AIA.

Prudential is acquiring AIA for US$35 billion (S$50 billion), and aims to raise US$21 billion from a rights issue. The listing of shares in both Hong Kong and Singapore is aimed at attracting Asian investors who might be key to the success of the rights issue. After all, some institutional investors have criticised the monster buyout and are warning that they will try to block it.

The listing of Prudential in Hong Kong and Singapore is by way of introduction and not the issue of new capital. In Hong Kong, shares were down 1.3 per cent to S$10.61 while shares in Singapore were at US$7.41. Fewer than 400,000 shares changed hands in Hong Kong while only 489,000 shares changed hands in Singapore.

Meanwhile, Prudential chairman, Harvery McGrath defended the planned takeover. He said that while some shareholders might vote against it, he expects the vast majority of shareholders to be comfortable with the deal. The acquisition by Prudential will also make it the biggest non-Chinese insurer, surging past its closest rivals AXA and Allianz.

AIA chief executive, Mark Wilson , has however told friends and industry executives of his plan to quit if Prudential succeeds in buying AIA. He said that the proposed takeover is a "disaster waiting to happen".

With AIA and Prudential having a large customer base in many countries, it is not surprising if Prudential will choose to synergise certain functions. This could lead to job losses. Perhaps that is what Mark Wilson has in mind. After all, he was credited with saving AIA last year when AIG almost collapsed.

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