A potential bid for Britain’s Prudential from big Chinese investors faces multiple obstacles and would proceed only if an initial public offering (IPO) from Asian rival AIA proves too expensive, bankers and analysts said.
Prudential shares soared by as much as 4.5 percent yesterday after the Sunday Times said big Chinese investors who backed Prudential’s abortive bid for AIA earlier this year were in the “early stages” of weighing up an offer for the insurer.
The investors, who include Go Guangchang (郭廣昌), chairman of China’s Fosun International, and Fred Hu (胡祖六), former chairman of Goldman Sachs in China, plan to keep only Prudential’s flagship Asian division, the paper said.
Prudential declined to comment.
Analysts said the biggest hurdle for any takeover would be offloading Prudential’s US and UK divisions at an attractive price.
One banker said Clive Cowdery’s Resolution was the only obvious buyer for the UK business, reducing competitive tension in any eventual sale process.
“Such a deal would be very difficult to pull off, and we are a very long way from anything happening,” a second banker said.
Any bid would also depend on the price of AIA’s planned IPO, seen as a competing investment opportunity for the Chinese investors.
“I wouldn’t rule it out, with [Prudential’s] rating being very attractive relative to Asian life companies,” Berenberg Bank analyst Peter Eliot said.
“But at the same time, I wouldn’t want to get too carried away. It’s got to be seen in the context of other opportunities, including the AIA IPO,” he said.
AIA, led by former Prudential chief executive Mark Tucker, hopes to raise US$15 billion from its partial stock market flotation, expected next month or in November.
Prudential agreed to pay US$35.5 billion for all of AIA in March, but was forced to pull its bid three months later after its shareholders balked at the price, and AIA’s parent, American International Group, rejected a lower offer.
Prudential shares were up 2.7 percent at £6.15 pence by 10:35am, breaching the £6.02 level for the first time since the company launched its AIA bid.