Investors have created a stumbling block in Prudential’s AIA acquisition deal by resisting the plans for expanding the business.
The insurer set out plans last month to buy the Asian arm of AIG and announced a rights issue to raise $20.9 billion to help finance the deal.
In order to go ahead Prudential must get backing from 75 per cent of its investors for the takeover at a crucial meeting on 7 June, but some shareholders are opposing the deal, saying they are paying too high a price for the merger.
Prudential said in an announcement to the London Stock Exchange.”We confirm that discussions regarding the current status of the transaction have taken place between Prudential and AIG and are continuing."
“These discussions may or may not lead to a change in the terms of the combination of AIA Group Limited and Prudential.”
If the deal falls through Prudential will be liable to payout millions in compensation to AIA. And now F & C, who own a 0.67 per cent share of Prudential's capital, has told the UK insurer it will vote against the $35 billion bid for AIG's Asian business.
Peter Lees, head of UK equities at F&C, said: "We are not concerned about the group's capital position, which we accept would likely improve on the back of the disposals which have been announced. We do however feel that the transaction involves very significant execution risk, given its sheer scale and complexity.
“In our view these risks, when set against the current price of the transaction, leave virtually no margin for error in the delivery of revenues and cost synergies.
“Therefore, while we are supportive of the strategic direction management is trying to take the company in, regrettably the economics of the deal as it stands mean we are unable to support the transaction.”
© Fair Investment Company Ltd