Pru buys M&G for agreed pounds 1.9bn

THE PRUDENTIAL, Britain's biggest life insurer, is to buy M&G, the country's largest unit trust group, in a pounds 1.9bn agreed deal.

The Pru, which said the deal plugs a gap in its range of long-term savings products, is making a cash offer of pounds 25 a share, a premium of 40 per cent to Wednesday's closing share price.

M&G, which has a customer base of 730,000 and some pounds 18.5bn funds under management, will operate as an autonomous unit within the Pru, giving the group a unit trust business to stand alongside its growing stable of retail financial brands including Scottish Amicable and Egg.

Sir Peter Davis, the Pru chief executive, said: "The combination of the Prudential and M&G creates leading market positions in the UK retail and investment product sectors."

Analysts said that the Pru needed to expand its unit trust business dramatically in response to the growing shift out of traditional life insurance and savings, a process that is likely to accelerate as a result of the Government's attempts to encourage more people to save.

M&G will take on the running of the Pru's existing unit trusts' stable while the Pru will take over M&G's institutional client base. There were also hints that Michael McLintock, M&G's youthful chief executive, is being lined up as a potential long-term successor to Sir Peter, who is 58 this year.

M&G's largest shareholder, the Esmee Fairbairn Charitable Trust, has agreed to sell its entire 33.3 per cent, conditional on the deal receiving the necessary regulatory approval, as have M&G's directors who own a further 0.44 per cent.

Rod Kent, the chairman of M&G, said the group had been courted over the past 18 months by a number of potential buyers including the Halifax, Britain's largest mortgage bank, but recently went back to the Pru. The Pru had originally approached M&G a year ago after deciding that it was the partner that made the most sense. "This is a good strategic fit but also a good cultural fit," Mr Kent said.

Analysts said the Pru had had to pay a pretty full price in return for having an exclusive run at M&G. But, having done so, it was now unlikely to see itself trumped by a higher bid.

Richard Burden at Goldman Sachs said: "This is a knock-out bid. But banks and insurance companies are not going cheap. This deal is strategically right."

The Pru is paying the equivalent of 10 per cent of assets under management. That compares with the 3 per cent paid by Merrill Lynch to buy Mercury Asset Management last year.

Jonathan Bloomer, the Pru's finance director, said: "The price is full but fair. It reflects firstly the fact that the deal has a degree of certainty, and second the scarcity value of M&G, which until yesterday was the only independently quoted asset manager in the UK of any real size.

"After having a couple of rough years, the changes Michael McLintock has made are starting to pay off."

He expects cost savings of pounds 10m a year, mainly as a result of eliminating the costs associated with M&G's plc status and from pooling resources.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Homeless Veterans charity auction: Cook with Angela Hartnett and Neil Borthwick at Merchants Tavern
charity appeal
Arts and Entertainment
Strictly finalists Simon Webbe, Caroline Flack, Mark Wright and Frankie Bridge
tvLive: Simon Webbe, Caroline Flack, Mark Wright and Frankie Bridgeface-off in the final
Ched Evans in action for Sheffield United in 2012
footballRonnie Moore says 'he's served his time and the boy wants to play football'
Life and Style
A still from the 1939 film version of Margaret Mitchell's 'Gone with the Wind'
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
The Tesco Hudl2: An exceptional Android tablet that's powerful, well-built and outstanding value

Sarah Silverman (middle) with sister Reform Rabbi Susan Silverman (right) and sister actress Laura Silverman (left) at Jerusalem's Western Wall for feminist Hanuka candle-lighting ceremony
peopleControversial comedian stages pro-equality Hanukkah lighting during a protest at Jerusalem's Wailing Wall
After another poor series in Sri Lanka, Alastair Cook claimed all players go through a lean period
Arts and Entertainment
The Bach Choir has been crowned the inaugural winner of Sky Arts’ show The Great Culture Quiz
arts + ents140-year-old choir declared winner of Sky Arts' 'The Great Culture Quiz'
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas