Pru executives fight for survival after AIA deal is declared dead

The Prudential insisted yesterday that it was backing its chief executive, Tidjane Thiam, and chairman, Harvey McGrath, amid mounting pressure for heads to roll after the insurer's planned $35.5bn (£24bn) takeover of its Asian rival AIA collapsed.

The Pru formally killed off the bid last night after failing to lower the price during talks yesterday with AIA's owner American International Group (AIG). The Pru will hand over a £153m break fee.

The Prudential said Mr Thiam and other executives had "the support of the board". "Tidjane Thiam is the chief executive of Prudential; Harvey McGrath is the chairman," it added, indicating that there were no plans for either to step down.

That could mean a stormy annual general meeting on Monday, at which the Pru had originally hoped to secure shareholders' support for the AIA bid. In addition to the break fee, the life insurer said it had also racked up £300m in one-off costs, which was worse than had been feared. A large portion of that will go to its bankers at Credit Suisse and lead share-issue underwriters JPMorgan and HSBC. The Pru's public relations adviser Brunswick will also take a cut.

Prudential has faced sharp criticism about its communications as the deal progressed, and for paying too much. An attempt over the weekend to cut the price to $30.3bn (£20.7bn) failed when AIG refused to alter the terms.

Mr Thiam said yesterday: "We entered into this potential transaction from a position of strength in Asia and we view the region as offering excellent growth opportunities for Prudential. We agreed with shareholders that a renegotiation of the terms was necessary given market movements, but it has not proved possible to reach agreement."

Analysts are now speculating about a possible break-up of the Pru, with Clive Cowdery's investment vehicle Resolution known to be keen on taking on the UK business. However, others cautioned Prudential to beware of any mergers and acquisitions unless it could secure a sufficiently high price for any of its units. This may prove difficult given the current uncertainties afflicting the world's financial markets.

Experts also raised the issue of Mr Thiam's future after landing the company with such a heavy price to pay from the AIA negotiations.

James Chappell, of Olivetree Securities, said: "Rather than M&A speculation, what the Pru needs now is a period of stability. Shareholders need to carefully decide who they want in charge to achieve this, with next week's AGM pivotal for current management's chances."

Tony Silverman, of Standard & Poor's, added: "Pru will now encounter some uncertainty around the group's future territorial focus and that uncertainty may extend to agents' comfort with group strategy, and even to senior management's tenure."

Shares in the Pru fell yesterday, closing 14.5p lower at 561p.

The runners and riders: Who could replace Mr Thiam at Pru?

Mark Tucker: The return of the prodigal son?

The previous chief executive, who left saying he had achieved what he wanted to and felt he had one more "big job" in him. It is still not clear what that might be and sorting out the mess at Prudential would fulfil the criteria even if it were only as a stop-gap. Tucker will not miss the World Cup (he has attended every one since 1966) but has strong links to the company and shareholders would welcome him with open arms.

Michael McClintock: The safe pair of hands?

Currently the boss of the independent republic of M&G, Prudential's semi-detached fund manager. Has a low public profile and is not really an insurance man, but is liked and respected in the City and could be just the man to steady the ship and restore credibility after the recent upheaval. His links with the investment community could be key to restoring faith in the Pru among its shareholders. But does he actually want the job?

Clive Cowdery: The barbarian at the gates?

Wouldn't be chief executive, but would surely be running things from behind the scenes if his Resolution could secure a takeover of Pru UK. He wants the deal so much it hurts, because it would fulfil his ambition to create a UK 'super-insurer' by combining the business with Resolution's Friends Provident and make him a second fortune. The insurance entrepreneur is, however, a controversial figure and would seek to drive a hard bargain with Pru, which will not enter into another deal without the full support of shareholders.

David Nish: Our friend in the North?

A crazy suggestion? Perhaps, but a combination with Standard Life could make some kind of sense, for the UK business at least. A deal would cement Mr Nish's reputation and make his company relevant again after its failed attempt to tie up with the first incarnation of Resolution a few years ago. And the all-important regulators might well prefer it to the alternative.

James Moore

Start your day with The Independent, sign up for daily news emails
News
people
News
Ed Miliband received a warm welcome in Chester
election 2015
Life and Style
Apple CEO Tim Cook announces the Apple Watch during an Apple special even
fashionIs the iWatch for you? Well, it depends if you want for the fitness tech, or the style
News
Astronauts could be kept asleep for days or even weeks
scienceScientists are looking for a way to keep astronauts in a sleeplike state for days or weeks
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own