'A shambles and a Disgrace' – The Pru reaps the whirlwind

But insurer's chairman says 'no reason' for directors to quit after blowing £450m on failed AIA deal. James Moore reports

Prudential's shareholders yesterday gave full vent to their fury over the company's failed bid for Asian insurer AIA, branding its directors as "arrogant" and joining with a growing band of City institutions that have called for heads to roll.

While there were a handful of positive comments aimed at the company's board, the majority were sharply critical of Prudential directors, and of chairman Harvey McGrath and chief executive Tidjane Thiam in particular. Shareholder Anthony Watts summed up the feelings of many when he described the affair as "a shambles from start to finish" and "a disgrace".

"You failed to do your job properly, all of you. All of you are responsible for this failed deal," he told directors, saying they should "do the honourable thing" and resign.

His comments, and many more like them, drew loud applause during a stormy affair that showed just how far the insurer's reputation with its investors has fallen. Directors, who glowered at the assembled band of as many as 300 predominantly small shareholders, were accused of being "smug" and "arrogant" at the meeting, held at the Queen Elizabeth Centre in Westminster.

The insurer had hoped the hall would serve as the scene for its triumph – the annual meeting had been delayed ahead of a vote to approve the AIA deal and a deeply discounted £14.5bn rights issue to fund it. In the end, the recriminations flew thick and fast as the men and women who are responsible for losing their shareholders £450m sat stony faced as the listened to one stinging criticism after another.

That £450m is made of the £300m Prudential will have to pay to a bevy of bankers, lawyers and public relations consultants as a result of the $35.5bn (£24.5bn) deal's collapse, together with a £150m break fee to AIA's US state-owned parent AIG.

As the meeting kicked off, Mr McGrath again stressed that Prudential's board was unanimously behind the decision to go ahead with a takeover that has left the company facing a crisis of confidence at a time when its results should have put it on the front foot.

In was those results that Mr McGrath attempted to use to draw some of the sting out of his employers' ire. He said Prudential's sales were up 27 per cent to £1.35bn for the first five months of 2010. Sales in Asia grew 33 per cent to £579m, although fund manager M&G did less well. Net inflows of £3.4bn were less than half the £7.9bn last time.

In his opening statement, Mr McGrath also said: "A lot has been said and a lot has been written about this proposed deal since we announced it in March. We entered into this from a position of strength, not weakness... AIA was an opportunity to accelerate our growth not to address a problem. It was a unanimous decision to pursue the deal and a unanimous decision to pull out."

He also said there had been 15 formal board meetings to discuss it, together with a plethora of other meetings: "This transaction did not want for forensic attention."

Despite this, Prudential committed a series of blunders and miscalculations following the bid's March unveiling, not least the failure to secure approval from the Financial Services Authority for the structure of a merged Prudential/AIA before pricing the rights issue and the attempt by Mr Thiam to take on a second job at French bank Société Générale.

Mr McGrath admitted the former did not inspire confidence and went on: "It is clear that shareholders felt less than fully engaged and informed. I am to sorry to those that this has caused discomfort and worry."

Mr Thiam said buying AIA was "in line with our strategy" and "worth the risk". He added: "I deeply regret (the deal collapsing). I will have the task of restoring your confidence."

Mr McGrath later said he saw "no reason" for any board member to resign, despite shareholder after shareholder standing up to demand that heads roll. They also questioned the advice Prudential received, in the wake of Mr McGrath's stressing the external counsel the company had taken over the price paid and the failed attempts to communicate the takeover. Prudential's main banking advisers were Credit Suisse, JP Morgan and HSBC, while it also retained public relations firm Brunswick.

Credit Suisse was named at the meeting by angry shareholders. One called for Prudential's counsellors to be "dispensed with". After the meeting had finished Mr McGrath said the company regularly reviewed its relationships as "a matter of course" and pointed out that none of the banks were on its regular roster of advisers, which stepped back from the deal on grounds that they were "conflicted". The company did obtain some supportive comments from analysts yesterday, but faces a difficult struggle to restore its standing, with Schroders having become the first top 15 shareholder to call for changes of leadership.

Other institutions, albeit with smaller shareholdings, have made similar comments in the run up to yesterday's bloodletting. And while the company's remuneration report passed with only a 6 per cent vote against, controversy could flare in the event of next year's bonus round.

Yesterday's results performance was strong enough to suggest that the company might attempt to pay up. Mr McGrath was equivocal saying the decision would be made at the appropriate time. If Mr Thiam is showered with money after he and his colleagues managed to lose their shareholders £450m, it could add gross insult to financial injury.

Emma Watson has become the latest target of the 4Chan nude hacking scandal
peopleThreats follows actress' speech on feminism and equality at the UN
Alan Bennett criticised the lack of fairness in British society encapsulated by the private school system
peopleBut he does like Stewart Lee
David Moyes and Louis van Gaal
Arts and Entertainment
Sheridan Smith as Cilla Black and Ed Stoppard as her manager Brian Epstein
tvCilla Episode 2 review: Grit under the glamour in part two of biopic series starring Sheridan Smith
Life and Style
Life and Style
Alan Turing, who was convicted of gross indecency in 1952, was granted a royal pardon last year
Life and Style
Arts and Entertainment
Tennis player Andy Murray's mum Judy has been paired with Anton du Beke for Strictly Come Dancing. 'I'm absolutely delighted,' she said.
tvJudy Murray 'struggling' to let Anton Du Beke take control on Strictly
Life and Style
Vote with your wallet: the app can help shoppers feel more informed about items on sale
lifeNew app reveals political leanings of food companies
Arts and Entertainment
The cover of Dark Side of the Moon
musicCan 'The Endless River' carry on the tradition? See for yourself
New Zealand fly-half Aaron Cruden pictured in The Zookeeper's Son on a late-night drinking session
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Worldwide ticket sales for The Lion King musical surpassed $6.2bn ($3.8bn) this summer
tvMusical is biggest grossing show or film in history
A new app has been launched that enables people to have a cuddle from a stranger
voicesMaybe the new app will make it more normal to reach out to strangers
Arts and Entertainment
Salmond told a Scottish television chat show in 2001that he would also sit in front of a mirror and say things like,
tvCelebrity Trekkies from Alex Salmond to Barack Obama
Life and Style
food + drink
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Quantitative Risk Manager

Up to £80000: Saxton Leigh: My client, a large commodities broker, is looking ...

Day In a Page

Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits