Prudential set for second go at £14bn rights issue

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Prudential will this week make a second attempt to price its £14bn rights issue and get its $35.5bn (£24.4bn) bid to take over Asian insurer AIA back on track.

The life insurer, which could publish its prospectus as soon as today, was forced into an 11th-hour delay the week before last after the Financial Services Authority raised objections to its proposals.

The regulator was unhappy that the group would be unable to repatriate capital held within Asian subsidiaries in the event of an economic meltdown.

Its objections are thought to have been overcome by the company agreeing to hold a £1bn "emergency fund" to protect it if the world goes into another economic tailspin.

Prudential needs to publish its prospects as soon as possible so it can start the process of pacifying its restive shareholders, some of whom have expressed unhappiness about the plans and a perceived lack of consultation.

Neptune, a fund manager, has set up an action group with a website and telephone line in a bid to rally smaller shareholders to its standard so it can achieve the 10 per cent required to table a confidence motion aimed at the deal's architect, chief executive Tidjane Thiam, at an extraordinary general meeting (EGM).

Capital World Investors, the US investment group which holds 12 per cent of Pru through two funds, has also reportedly expressed disquiet over the deal. But the firm has yet to formally decide how to vote. Standard Life is another shareholder to voice concerns about the deal.

Capital's decision will be crucial because Pru requires a super majority of 75 per cent for the deal to pass.

The company is understood to be prepared to embark on a charm offensive in a bid to convince investors that the deal is in their interests. It needs to move as quickly as possible because if the deal fails to complete on target, it will have to pay a daily fine. There is also a substantial break fee if the deal fails to complete. Critics of the takeover, which would make Prudential the biggest insurer in Asia, have argued that investors would get more value from the company were it to be broken up.

Prudential's shareholders are relatively widely diffused. Its second biggest investor is BlackRock, with 6.34 per cent, followed by Legal & General with 4 per cent and Norges Bank with 3.18 per cent.

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