Prudential courts backers for bid on AIG assets

Analysts’ projections suggest taking on the Asian arm of AIG would boost Prudential’s profits by $700m.

Prudential is trying to win City
support for its audacious £23bn takeover of American International Assurance,
the Asian arm of AIG, by promising the deal will bolster its revenue by an
estimated $700m (£461m) a year.

In a series of crucial meetings
with investors, key members of the Pru management team have made clear they are
excited by the “revenue synergies” that they can generate by running
AIA more efficiently than its current owner AIG, which had to be bailed out by
the US government in the days after the collapse of Lehman Brothers in October
2008.

Official estimates of revenue gains
that can be made from the deal will be contained in the formal prospectus that
will accompany the insurers’ proposed £14bn issue of new shares that investors
will be asked to buy to fund the ambitious deal.

While Prudential has been careful
not to give shareholders the exact projections on the scale of the enhanced
revenue stream, it is not taking steps to steer investors away from analysts’
projections of a boost of $700m each year.

Chief executive Tidjane Thiam is
attending most of the private meetings with senior investors in the City, but
often flanked by the chairman Harvey McGrath, as well as the finance director
Nic Nicandrou.

Thiam took a break from the charm
offensive on Friday to meet an official delegation from Singapore and will
start to hold face-to-face discussions with Edinburgh-based institutions on
Monday.

The Pru has been battling with a
falling share price since it announced the deal at the start of the month when
it was trading at 602p. On Friday it closed at 552.50, amid speculative trading
by hedge funds and continued anxiety about the scale of the fundraising the
insurer needs to embark on to complete the deal.

AIA, which has 20 million customers
and 350,000 agents across China, the Philippines and other countries in east
and south-east Asia, is being sold by AIG, which needs to repay a loan from the
US Treasury. AIG was bailed out with $180bn (£120bn) of US government funds.

AIA had been planning to float in
Hong Kong before the approach from the Pru, which is now planning its own
listing in the former British colony in a move that will help it to raise the
funds needed to complete the deal.

Pru’s executives have been trying
to reassure their big City investors that it is determined to offer them any
new shares it issues in London first – in a process known as pre-emption rights
– before selling any unwanted ones to big sovereign wealth funds.

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