Prudential shares start trading in HK, Singapore
Prudential shares will begin trading in Hong Kong and Singapore Tuesday morning as the British insurance giant taps the region to help fund its massive takeover of Asian insurer AIA.
Prudential, which is keeping its primary listing in London, is hoping to woo Asian investors ahead of its planned 21-billion-US dollar rights issue to buy the Asian arm of troubled US insurer American International Group (AIG).
Prudential has agreed to buy AIA for 35.5 billion US dollars in the insurance sector's biggest-ever takeover, but the monster buyout has been criticised by some institutional investors who warned they would try to block it.
The deal would transform Prudential into the world's top non-Chinese insurer by market capitalisation, ahead of major competitors Allianz and AXA.
The Hong Kong and Singapore listings are being done by way of introduction, which means adding trading venues without issuing new shares.
"The two new listings (in Hong Kong and Singapore) will enable investors in Asia to participate in the outstanding growth potential that Prudential offers," Tidjane Thiam, Prudential's group chief executive, said in a statement last month.
The takeover will give Prudential about 30 million customers in Asia and see the Asian operation become the group's biggest division -- contributing some 60 percent of new business profit.
Prudential said it was offering almost 14 billion new shares, each priced at 104 pence. According to analytical group Dealogic, the rights issue is the biggest ever launched to fund a takeover.
Current Prudential investors will be offered 11 new shares for every two shares they own.
Francis Lun, general manager at Fulbright Securities in Hong Kong, said Asian investors would likely embrace Prudential's listing.
"It will be well received because AIA is a well known company in Hong Kong," Lun told AFP.
Patricia Cheng, an insurance analyst at Hong Kong brokerage CLSA, said the Hong Kong and Singapore listings were aimed at funding the AIA takeover rather than creating a new shareholder base.
"For Prudential, the primary issue is not to get a shareholder base here, but to get support for the rights issue," she told AFP.
Cheng said she shared investor concerns about the mega-deal's price tag and Prudential's "unrealistic" expansion plans in Asia.
"Their concerns are all valid," she told AFP.
"(Prudential) is trying to do a deal that is larger than its own market capitalisation. That creates a large financing burden."
The British group had delayed by almost two weeks details of the record rights issue as regulators voiced concerns about the enlarged company's capital strength.
Prudential said it expects to complete the takeover in the third quarter of 2010 while reports suggest Prudential may have to sell its British operations to fund the rest of the deal.
The AIA deal and the rights issue need 75-percent backing at a shareholders' meeting on June 7.
Recent media reports have suggested that AIG may try to list its Asian arm if the Prudential deal craters.
© 2010 AFP