Pru scraps AIA bid at cost of £450m

2 June 2010 0:00 am | Updated: 2 June 2010 9:56 am | By Lee Jones

The UK insurer initially agreed to buy AIA for £24.6bn in March but after a shareholder backlash it tried to reduce the price to £20.7bn. AIG rejected the negotiation and the deal fell through.

Prudential says that under the termination agreement, it will pay AIG £450m including £152.5m in break fees.

Prudential chairman Harvey McGrath says: “Since we announced the potential transaction we have seen significant falls in the markets and unfortunately it has not been possible to reach an agreement so we feel it is in the best interests of our shareholders not to pursue the opportunity.”

Shareholders had warned Prudential chief executive Tidjane Thiam (pictured) that he would not gain the 75 per cent of voters needed for the initial bid, which would have required a huge cash call.

According to the Financial Times, shareholders are already calling for Thiam’s resignation. A shareholder told the FT: “The management team is not in a good place. It will ultimately cost [Thiam] his job.”

Thiam says: “Our existing business in Asia has delivered another record performance in the first quarter of this year and we will continue to focus on generating sustainable shareholder value.”

Neptune Investment Management founder Robin Geffen says: “I would like to thank a very large number of investment organisations in the City and elsewhere who supported the campaign and without whom it would simply not have succeeded. This was ultimately a triumph of common sense and the investment management community standing up to fulfil their responsibilities to their investors.  
 
“We are delighted to hear that Michael McLintock, who has done such a great job over many years at M&G, is likely to be the next chief executive.  He is a very able and good manager who always listens carefully to those around him. This would leave the Pru in a much stronger position going forward.”

 

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