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Cavendish’s Mumford says Pru deal “one gamble too far”

Cavendish Asset Management senior fund manager Paul Mumford says Prudential’s proposed £24.5bn takeover of AIA is “untenable” even if the insurer is able to renegotiate the price as it has lost the confidence of shareholders.

Mumford says even with a smaller price-tag, the proposed acquisition of AIG’s Asian arm is “too expensive and too risky” to ask investors to back.

He says: “The Pru has woefully misread the appetite of shareholders to back both a deal of this size and of this complexity.

“Question-marks remain over how to value a company in a very different market, where high-growth potential is offset by much higher risk in terms of currency, market volatility, and the movement of that all-important Asian nucleus, China’s economy.

“Combined with considerable sovereign debt in AIA, a chequered AIG legacy, and the near-impossibility of ever unwinding this deal if it proves unworkable, this is simply one gamble too far from the financials sector.

“It is a defining moment when the grave doubts about this deal have had to come from within the shareholder community itself. It has been in the interests of much of the City, which stands to gain substantially from the deal going through, to stay moot on the point about whether it believes any value will be delivered for investors.

“The only people taking on any risk are the shareholders themselves – who are justifiably angry at propping up the short-term profits and the reputations of those close to the deal.”

Meanwhile, F&C is the latest investor to indicate that it will vote against the proposed bid for AIA at the shareholder meeting on June 7.

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  1. Since the beginning of this propsal my overriding thought has been that The Pru is betting the whole business on this deal. It’s too big and it’s too risky.
    My own shareholding, modest though it is, was built up over 15 years of employment with the Pru in the knowledge that the company was prudent by name and by nature. This deal stretches that view too far. It’s an ego trip by the new Chairman

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