Prudential delays rights issue to fund Asian insurer buyout
British insurer Prudential on Wednesday said it had decided to delay launching a rights issue aimed at helping to fund a 35.5-billion-dollar takeover of AIA, the Asian arm of troubled US insurer AIG.
Prudential, which had been expected to reveal details of its launch for a rights issue worth about 20 billion dollars on Wednesday, said it had been forced into a delay as it was still in talks with British regulators.
The insurer added that it still expected to complete the sector's biggest-ever takeover during the third quarter in 2010.
"Prudential has decided to delay the pricing and launch of the rights issue whilst it seeks to bring its discussions with the FSA (Financial Services Authority) to a conclusion," the insurer said in a statement.
It added that discussions were ongoing "in particular in relation to the capital position of the enlarged group".
Prudential said it did not expect the delay "to affect the overall timing for the completion of the transaction set out on 1 March 2010.
"Other regulatory and anti-trust approvals are progressing as planned and it is still anticipated that completion of the transaction will occur during the third quarter of 2010," it added.
In reaction, Prudential's share price rose 0.45 percent to 561 pence on London's benchmark FTSE 100 index, which was down 0.12 percent at 5,404.79 points in early trade.
Prudential chairman Harvey McGrath said his company remained "entirely committed" regarding the AIA takeover.
"The work completed since 1 March with the AIA and Prudential teams has convinced me more than ever that the enlarged group will be in a position to capture sustainable and highly profitable growth and will deliver substantial long term value for our shareholders," he added in the company's statement.
Alongside the rights issue, London-listed Prudential is planning to begin trading existing shares in Hong Kong and Singapore later this month.
The planned listings in Asia is seen as a move to garner support from regional investors for the mega rights issue, which needs 75 percent of voter support at a meeting scheduled for May 27.
The Hong Kong and Singapore listings will be done by way of introduction, which means adding trading venues without issuing new shares.
Meanwhile the buyout of AIA will double the size of Prudential and transform it into the world's top non-Chinese insurer by market capitalisation, ahead of major competitors Allianz and AXA.
Sales in Asia already make up half of new contracts for Prudential across a number of countries including China, India, Indonesia, Malaysia and Thailand. The company also has a strong presence in Britain and the United States.
The purchase of AIA also allows AIG to repay the US government a huge chunk of debt and emphasises a renewed pick-up in cross-border takeover activity since the start of 2010 as the global economy recovers from its deep downturn.
AIG has been forced into giving up some of its assets after the company's near collapse in the depths of the financial crisis led the US government to hand it a bailout of around 180 billion dollars.
© 2010 AFP