L&G leads call for Pru to cut AIA deal price

The Prudential will seek this week to renegotiate the price of its $35.5bn (£24bn) deal to buy AIG's Asian assets amid growing anger among investors about the proposed takeover.

Following last week's 11th-hour postponement of Prudential's $20bn rights issue, spiked by regulatory concerns about capital at an enlarged group, Legal & General, one of the Pru's biggest shareholders, has become the latest investor to privately raise concerns about the cost of the deal. It joins a growing band of disgruntled stockholders, including Fidelity, Blackrock and Capital, which could collectively seek to prevent the deal that needs the backing of 75 per cent of the insurer's investors. Blocking the deal, many investors believe, could lead to the Pru being broken up and its parts sold off.

Mark Burgess, Legal & General Investment Management's head of equities, is understood to have spoken to the Prudential last week about a range of topics, including possible renegotiation of the AIA price.

City sources said that Prudential could seek to reduce the cash component of the deal, offering a larger number of shares instead.

A spokesman for Legal & General declined to comment.

Prudential's chief executive, Tidjane Thiam, is likely to face continued investor ire this week over the deal with a number of investors calling for his head. "He is a dead man walking," said a leading fund manager. "It's a hell of a punt at a ludicrous price and it is his botched deal."

Another investor said: "The Pru has exhibited a level of arrogance we've not seen in the City for some time. Tidjane is using the Pru like some sort of shell company. It's not right and there are plenty of people who are not happy."

Prudential's directors and advisers spent Friday calling investors seeking to assuage concerns that the deal could fail. The calls came after Pru put out a statement saying that separate listings of its shares in Hong Kong and Singapore would further delay the completion date of any deal.

A Prudential spokesman declined to comment when asked if Mr Thiam had offered to tender his resignation over the embarrassing delay to the rights issue. "He is just working on getting the prospectus out and putting as powerful a case to investors as possible," said the spokesman. "And it is a powerful case."

Investors have also criticised the role of the Pru chairman, former Man Group hedge fund chief executive Harvey McGrath. And Wednesday's last minute FSA intervention has also thrown the spotlight on the role of Credit Suisse, HSBC,and Cazenove, lead advisers on the takeover.

The decision to block the deal over a potential dearth of capital is believed to have been sanctioned by senior regulatory officials, possibly including Adair Turner, the FSA chairman.

One banker said: "Credit Suisse advised the Government and the FSA over the recapitalisation of the banks so it would clearly have been alert to issues of capital. They also worked on the Lloyds deal. This has been spiked at the very highest level."

It's believed that the FSA also raised concerns about a possible so-called "sweetheart deal" to sell the UK business to Clive Cowdery's Resolution. Prudential is also looking to sell its US Jackson Life subsidiary with Sun Life of Canada thought to be the most likely bidder. The sale of the two units could raise as much as £10bn

Should the deal to buy AIA fail, Prudential faces a mountain of penalty costs including a $225m break fee.

Shares in Prudential closed the week down 15p at 543p.