Prudential, the UK's second-largest insurer, finally ended any ambiguity over its intentions towards the internet bank Egg yesterday, laying down a £214m all-share offer to buy out the remaining 22 per cent of the company it does not own.
The bid, backed by the Egg board, comes at a 15 per cent premium to the bank's closing share price on Wednesday, valuing the total company at about £973m.
Although Prudential would not say how much support it has mustered from shareholders, it is known to have spent the past few weeks talking to Egg investors, and said it is confident of receiving backing for its bid.
Mark Tucker, Prudential's chief executive, said the group had decided to push ahead with the move to capitalise on the cross-selling opportunities between Pru, M&G, its fund management arm, and Egg. He said the deal would generate cost-savings of £40m a year by 2007, due in part to the elimination of Egg's stock market listing, but also from synergies through the co-ordination of administration systems and Treasury activities.
The future of Egg has been one of Prudential's biggest headaches over the past two years, with Mr Tucker's predecessor, Jonathan Bloomer, publicly putting the company up for sale before withdrawing it months later after failing to negotiate a satisfactory price. The confusion over Egg and the miscommunication to shareholders over last year's £1bn rights issue were the main events which contributed to Mr Bloomer's dismissal this year.
Analysts and investors were sceptical about the merits of the deal, questioning Mr Tucker's assertion that he would generate £40m of annualised cost savings. Prudential shares closed down 2.5p at 525p.Reuse content