Pru float-off set to raise pounds 500m

Prudential, the UK's largest insurer, yesterday sparked widespread City expectations of a takeover bid for a building society or a life company by announcing it was floating-off part of its reinsurance subsidiary Mercantile & General. The sale is likely to raise at least pounds 500m.

Analysts reacted by predicting an imminent bid by Prudential for Woolwich Building Society, which itself is preparing for a pounds 3bn stock market flotation next year. Prudential's shares rose 4p to 409p yesterday.

However, Peter Davis, group chief executive at Prudential, appeared to dampen down the City's bid fever by suggesting that any likely acquisition was up to 18 months away. Woolwich intends to put its own conversion plans to members early next year.

Mr Davis said of the market speculation: "It is a bit disappointing when we are trying to carry out a review and trying to decide what is best strategically for Mercantile and ourselves.

"We have made no secret of our intentions in that area. Because we have been very open, the markets have been expecting us to do it overnight."

Mr Davis added: "The changes of being able to acquire a life company or a building society at a sensible price and to do it immediately are highly unlikely. Expectations have been unrealistic. It might take a bit longer than the market appears to be expecting." He said that floating off about half of Mercantile, valued yesterday by analysts at up to pounds 1.2bn, would occupy much of Prudential's time before late autumn, when the partial listing was expected to take place, subject to market conditions.

The sale of Mercantile follows a strategy review of the entire Prudential group, which has led the company to decide to concentrate on retail financial services and associated fund management activity.

Mercantile is one of the world's big reinsurers, operating in more than 100 countries. In 1995, the company had wrote gross premiums of pounds 1.3bn and contributed pounds 196m, almost 25 per cent, to the group's pre-tax profits of more than pounds 800m.

Mr Davis said: "After careful consideration, we have decided that the synergy between Prudential and Mercantile is not all that great and [we know] that the management [there] would like to grow the business." The proceeds might be used to fund its future acquisition strategy, he added. Although the Prudential's primary aim is to seek a listing for about half the subsidiary, if a suitable offer for the entire business were to me made, the company would consider it carefully, he added.

John Engestrom, chief executive at Mercantile, said: "We welcome this decision and believe that our resulting higher profile and independence will assist us in further reinforcing our already strong market position, especially in life and health reinsurance."

Despite the Prudential's comments, analysts claimed a potential bid for the Woolwich was the likely result of the pounds 500m-plus, which the company hopes to raise from its partial disposal. While Mr Davis said a life company acquisition could be funded through shareholder interest in the Prudential's own life fund, thought to be up to pounds 2.5bn, a society takeover on the scale of the Woolwich might still require a significant rights issue.

Voices
On the last day of campaigning before the polling booths open, the SNP leader has written to voters in a final attempt to convince them to vote for independence
voicesIs a huge gamble on oil keeping the First Minister up at night?
Life and Style
techApple has just launched its latest mobile operating software – so what should you do first?
Arts and Entertainment
tv

Arts and Entertainment
Rosalind Buckland, the inspiration for Cider with Rosie died this week
booksBut what is it like to be the person who inspires a classic work of art?
PROMOTED VIDEO
Arts and Entertainment
The former Doctor Who actor is to play a vicar is search of a wife
film

Matt Smith is set to join cast of Jane Austen classic - with a twist

News
A male driver reverses his Vauxhall Astra from a tow truck
newsThe 'extremely dangerous' attempt to avoid being impounded has been heavily criticised
Arts and Entertainment
Lionel Messi in action for Barcelona
filmWhat makes the little man tick?
Arts and Entertainment
tvReview: An undercooked end (spoiler alert)
News
i100
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Pharrell dismissed the controversy surrounding
musicThe singer said 'the last thing I want to do is degrade'
Sport
Cesc Fabregas celebrates his first Chelsea goal
footballChelsea vs Schalke match report
Arts and Entertainment
Toby Jones (left) and Mackenzie Crook in BBC4’s new comedy The Detectorists
tvMackenzie Crook's 'Detectorists' makes hobby look 'dysfunctional'
Life and Style
fashion

Olympic diver has made his modelling debut for Adidas

News
i100
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

Property Underwriter

£70-90,000: Saxton Leigh: Our client a London Market Insurer are seeking a Pro...

Operational Risk Manager - Asset Management

£60,000 - £80,000: Saxton Leigh: Our client is an leading Asset Manager based...

Trainee Recruitment Consultant Birmingham

£18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week