MBNA and Pru set to agree a price for Egg

Click to follow
The Independent Online

The auction for Egg is about to conclude, with MBNA, the US credit card giant, poised to buy the financial services company after six months of wrangling.

The auction for Egg is about to conclude, with MBNA, the US credit card giant, poised to buy the financial services company after six months of wrangling.

The move comes after Prudential, which owns 79 per cent of Egg, reopened talks to try to sell the telephone and internet business some weeks ago, having failed to agree on a price first time round, when the company looking most likely to buy Egg was Royal Bank of Scotland.

The deal with MBNA is expected to be announced within the next couple of weeks, with the US business paying a premium to the £1.4bn that Egg was valued at when it floated on the stock market in June 2000.

Prudential has finally managed to strike a deal after a fraught process to try to sell the credit card and savings business. It opened an auction for Egg in January and was very close to selling it to RBS. However, sources said the two sides fell out over the price of the business.

Following widespread criticism of the way Prudential handled the sale, it reopened the auction and is thought to have agreed to a significantly lower price than it initially hoped it would get.

City sources said that when Egg was first put on the block Prudential hoped it would achieve a price in the region of £1.6bn. MBNA may well have beaten Britain's second biggest insurer down significantly since then.

Egg's shares closed at 155p on Friday, having surged to nearly 200p when the auction was announced. They floated at 160p.

The deal will significantly boost MBNA's presence in the UK. Egg has grown rapidly in its relatively short life, picking up 3.2 million customers and taking 5 per cent of the market for new credit cards.

However, Egg ran into trouble last year when its bold expansion into France hit a rock because consumers in that country are less keen on financing their lifestyle through credit than people in Britain and the United States.

Egg said last October that, as a consequence of its problems in France, it was seeking joint venture partners to help bear some of the costs of remaining in France. That process lead to various companies approaching Prudential about buying out the entire business.

MBNA is thought to be interested only in Egg's credit card arm and may sell off Egg's savings and mortgages business.

Comments