Prudential launches £14.5bn rights issue
Prudential launched the UK's biggest ever rights issue today as it looks to fund the controversial acquisition of AIG Group's Asia business.
The £14.5 billion cash call should have been launched two weeks ago but was delayed after the Financial Services Authority raised concerns about the capital strength of the enlarged company.
The takeover will give Pru around 30 million customers in Asia and see the Asian operation become by far the group's biggest division - contributing around 60% of new business profit.
The Pru has restructured the deal following the FSA's intervention, but has faced criticism from some shareholders that the planned move is too risky and expensive.
Chief executive Tidjane Thiam said the launch of the 1,000-page prospectus for the rights issue gave the company a better platform to step up the process of winning over shareholders ahead of a vote on the takeover in June.
He added: "The combined business will be a fast growing and highly profitable company, with a leading position in many of the most attractive markets in the world."
Mr Thiam did not comment on speculation that the takeover will lead to the disposal of the company's UK operation.
The offer price for the new shares in the rights issue represents a 40% discount to the prevailing market price.
If the deal goes through, the Pru will become the largest foreign insurer in Asia and the largest player in Hong Kong, Singapore, Malaysia, Indonesia, Vietnam, Thailand and the Philippines.
Panmure Gordon analyst Barrie Cornes has a buy rating on the stock, despite the possibility that it may fail to get three-quarters of the vote on June 7.
He added: "We believe that there is and has always been a strong strategic logic to the deal with only the price and execution being our concern.
"It is very early to form a cast iron view but we believe that either the proposed deal will fail to achieve the required 75% hurdle rate and the shares will bounce or investors will take comfort from improving economics and the shares will rally."
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